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ADVANCED ENZYME TECHNOLOGIES

Advanced Enzymes

Advanced Enzyme Technologies Limited (AETL) is a completely debt free company engaged in research and development as well as manufacturing and marketing of 400+ proprietary products developed from over 68+ indigenous enzymes and probiotics.

Market price on the date of publishing this report-: 339 Rs

Incorporated in 1989 as Advanced Biochemicals Private Limited, over the past 32 years Advanced Enzymes Technologies has come a long way with, many acquisitions made over the past several years.

However, the company’s adventure began in 1957, when its founder, Late L. C. Rathi, pioneered the extraction of papain, an enzyme complex obtained from papaya fruit that is extensively employed in pharmaceutical and medical applications. In 1958, he established India’s first enzyme production factory. Since then, Advanced Enzymes has grown to become the largest manufacturer of enzymes in Central Asia!

AETL is one of the few firms in the world with extensive knowledge and experience in the production of fermented enzymes. The firm serves a wide range of sectors and verticals, including Human Nutrition, Animal Nutrition, and Bioprocessing. The firm sells unique enzyme products and customised enzyme solutions to pharmaceutical and nutraceutical companies in India, North America, Asia (ex-India), Europe, and other countries across the world. Customers employ enzymes as active components in pharmaceutical and nutraceutical compositions.

In 2018 4 food enzymes got approved as a processing aid with Food Safety Standard Authority of India (FSSAI) and 4 enzymes were registered with REACH -ECHA (European Chemical Agency).

Today, Advanced Enzymes can service 700 clients in 45 countries through three fully owned subsidiaries, three joint ventures, and five step down subsidiaries. With exports to six continents, the firm offers tailored and effective enzyme solutions, as well as the greatest technical guidance and support.

Business Products

Before we jump on the product portfolio of advanced enzymes let us understand in short what exactly are the various products and what are the various categories of the various products manufactured by the advanced enzymes.

What exactly are enzymes?

Enzymes are natural protein molecules created by all living creatures that operate as catalysts within living cells. They operate as specialised catalysts, accelerating the rate of  biological processes. For its customers, Advanced employs enzymes to replace chemicals and increase the efficiency of a wide range of industrial processes.

Enzymes play a significant role in development and production of nutritious food and beverage products. Customized enzyme solutions and proprietary products are used in the processing of fruit and vegetable, cheese, protein, grains, and fats and oils, along with several other industries such as dairy, baking, brewing, and cereal extraction 

What exactly are probiotics?

Probiotics are living bacteria that, when consumed in appropriate quantities, provide health advantages to both humans and animals. Probiotics are currently an essential component of various therapy for digestive problems, and innovative uses for the treatment of a variety of other diseases are being researched. Probiotics work in the human/animal system by combating disease-causing bacteria and secreting helpful compounds. Advanced Enzymes has created and scaled up technology for the manufacturing and application of a number of essential probiotics.

Advanced Enzymes caters to the products spread across four segments which products various different products such as

  • Human Nutrition-: AETL manufactures enzyme-based feed additives for the animal nutrition sector, mostly for poultry and pigs. The digestibility of the components can be improved by adding enzymes to the meal. Animal Nutrition product offering allows animals to maximise the nutrients they take from diet, lowering feed costs, reducing animal waste output, and so helping to decrease environmental pollution. Probiotics have helpful metabolites and are commonly employed in animal healthcare. We created and tested probiotic compositions for use in veterinary medicine.
  • Animal Nutrition – AETL manufactures enzyme-based feed additives for the animal nutrition sector, mostly for poultry and pigs. The digestibility of the components can be improved by adding enzymes to the meal. Animal Nutrition product offering allows animals to maximise the nutrients they take from diet, lowering feed costs, reducing animal waste output, and so helping to decrease environmental pollution. Probiotics have helpful metabolites and are commonly employed in animal healthcare. We created and tested probiotic compositions for use in veterinary medicine.
  • Food Processing -: Food and beverage makers are increasing the options enjoyed by customers and users all over the world by optimising resources and consistently improving product quality. Enzymes play a critical role in delivering more healthy and appealing food and beverage items to the modern world, and they provide major benefits that go beyond what traditional alternatives can provide.
  • Non-Food Processing -: Enzymes are thought to be effective biocatalysts for a wide range of processes. Advanced Enzyme (AETL) provides environmentally friendly solutions for a wide range of sectors, including textiles, leather, detergent, and pulp and paper, which are utilised in the production of a wide range of goods. Biological solutions increase the efficiency of industrial operations by conserving energy, water, and other raw resources while lowering waste and effluent load, assisting clients in meeting pollution standards lowering the total process costs.

Acquisitions

For € 7.65 million, AETL bought Evoxx Technologies GmbH through its fully owned subsidiary Advanced Enzymes Europe B.V Technologies in 2017. Evoxx Technologies GmbH is an industrial biotech firm that focuses on the research and manufacture of industrial enzymes as well as a few specialty carbohydrates for nutritional purposes. Evoxx was started in 2006 as evocatal GmbH, and it now employs 35+ scientists and professionals across two campuses in Germany.

Advanced enzymes acquired 70% stake in Hyderabad-based JC Biotech Pvt. Ltd. The purchase will greatly increase Advanced Enzyme’s market share in the enzymes area and allow it to join the biopharmaceutical compounds field.

JC Biotech manufactures API serratiopeptidase, an anti-inflammatory enzyme, and has two biopharmaceutical compounds in its development. It also has a reasonably advanced method for producing algal DHA, an omega-3 fatty acid used in human nutrition.

SciTech Specialities Private Limited (SSPL), India, a contract manufacturing business with specialty technology specialising in effervescent granules and tablets, was acquired by Advanced Enzyme Technologies in January 2021. The purchase has increased its production capacity by adding two nutraceutical and pharmaceutical manufacturing facilities, bringing the total to nine. The two firms’ combined synergies will enable your company to develop its B2C business while also empowering it with critical applications in its present verticals and providing new delivery mechanisms for existing items. This collaboration will boost the company’s overall capacity growth and R&D capabilities.

Subsidiaries

Company has increased its stake in JC Biotech to 85% post acquisition.

Company has also acquired SciTech Specialities private limited and currently holds around 51% stake in the company thereby making it wholly owned subsidiary of the Advanced Enzynme technologies limited.

Financials

For the quarter ended Q2FY22

  • Revenue has increased by ₹ 67 million this is about 6% from ₹ 1,204 million to ₹ 1271 million as compared for Q2FY21
  • EBITDA is decreased by about ₹ 92 million from ₹ 585 million to ₹ 493 million during this quarter.
  • Operating profit margins were around 39% as compared to 49% in this quarter. Decrease in profit margins was on account of increase in raw material cost as well as various different costs associated with the manufacturing.
  • Profit before tax is decreased by about ₹ 107 million from ₹ 520 million to ₹ 413 million. 
  • PAT is at ₹ 303 million as compared to ₹ 386 million in Q2 of FY2021 so there is a decrease of 22%. 
  • Total R&D expenditure of 63 million was incurred during this quarter and last quarter it was ₹ 43 million . On YTD company has spent about ₹ 96 million on R&D on revenue side and capex will be another some ₹ 20 million or so. 

For Subsidiaries

  • Sales contribution of SciTech which is roughly about ₹ 97 million in this Q2.
  • EVOXX reported ₹ 53 million revenue and EBITDA of ₹ 10 million while PAT was slightly negative because of tax impact .
  • For JC Biotech Q2 revenue stood at ₹ 150 million and EBITDA of ₹ 45 million, PAT of ₹ 25 million as compared to revenue of ₹ 130 million, EBITDA of ₹ 37 million, and PAT of ₹ 21 million. 

For the year ended March 2021

  • Consolidated operating revenue grew by 13% to Rs 5,018 million from Rs 4,440 million in FY20. 
  • EBITDA grew by 14% to Rs 2,315 million.
  • EBITDA margin remained at 46%. 
  • PAT too grew by 14% to Rs 1,515 million compared to Rs 1,330 million in FY20. 
  • Human Nutrition continued to be our primary revenue driver, contributing ` 3,786 million in FY21, up by 18%. Our Animal Nutrition and Bio-processing segments degrew by 11% and 1%, respectively 

Managements comments

  • Overall Capex is expected to be around ₹ 10 Crores to ₹ 12 Crores on a yearly basis for FY2022. 
  • Company is working on setting up a new R&D facility. Work has started for the same that is company has received sanction from municipality corporations and constructions for the same would start in Probably one and a half months to two months. Time frame for completion of the same is expected to be around one and half years for the first phase.
  • For the new products company has company has done good progress on the biocatalyst side in this quarter. Company hascome out with three more molecules and their applications but it has to go to the customer level. Currently company is standing with six, seven molecules in the biocatalyst front, which is a good progress but it will probably take another two to three quarter to really generate revenue. 
  • Due to the covid scenario all off the companies as well as the majority of the customers of Advanced Enzymes have been refraining from placing new orders. As a result there has been a built up in the inventory with the company. If we look at the inventory level as of September 30, 2021 it is about ₹ 1,153 million which is roughly ₹ 115 Crores as compared to ₹ 94 Crores as on March 31, 2021. Going forward management expects this situation to normalise by the end of the Q4 for the current year.

Sectorial Outlook

The worldwide enzymes market was worth US$ 10.6 billion in 2020, and it is predicted to expand at a compound annual growth rate (CAGR) of 7.1 percent from 2020 to 2027.

The industrial enzyme market was valued at more than US$ 6,300 million in 2020, and it is expected to grow at a CAGR of more than 6% during the forecast period (2021-2026).

With a market share of more than 35%, food processing leads the industrial enzymes industry. This is the fastest-growing application category, owing mostly to the world’s expanding population and rising spending power.

The worldwide revenue of the food and beverage business is expected to reach US$ 276.9 billion in 2021, up from US$ 240 billion in 2020, with a CAGR of more than 8% between 2021 and 2025.

The Indian enzyme market has yet to establish its footing since it is so minor in comparison to other industries in the nation. However, rising knowledge of enzyme capabilities and the resulting advantages (both nutritional and cost-effective) will be major growth factors in the future years. The Indian enzyme industry was valued at INR 23.60 billion in FY19, with a growth rate of 7%.

The Indian nutraceuticals industry is predicted to expand from an estimated US$ 4 billion to an estimated US$ 18 billion by the end of 2025. Dietary supplements account for more than 65 percent of the nutraceutical business, which is expanding at a pace of 17 percent per year and is expected to rise at a rate of 22 percent per year, especially given the current pandemic’s emphasis on prevention.

Over the projected period, the India Probiotics Market is predicted to increase at a compound yearly growth rate of 13.56 percent, reaching a market value of US$ 961.856 million in 2025, up from US$ 448.456 million in 2019. India has emerged as the world’s second fastest-growing major economy, and it is predicted to be one of the world’s top three economic powers by 2025.

Going Forward

Management is very optimistic that the revenue for the whole year would be flat to somewhat positive as compared to the previous year. Also for the margins management has conveyed that they are expecting the margins for the whole year to stay in the range of 42%-48%. There has been build up in the inventory which should smooth over the coming period.

Current Qtr Q2FY22 was the worst quarter what we have seen and the management hopes that going forward the there will be improvement in the coming quarter.

Conclusion

Advanced Enzyme Technologies a completely debt free company engaged in research and development as well as manufacturing and marketing of 400+ proprietary products developed from over 68+ indigenous enzymes and probiotics. Company has consistently posted operating operating profit margins of more than 45% with an exceptional reduction in the profit margins which dropped to 39-42%. However management is very confident of get it back to the normal levels in the coming period as well as on the overall basis for the complete year margins to remain more or less in the same range. Additionally company is also working on many new products which should enhance the revenue in the coming period. Being completely debt free, comply currently has highest every cash balance of about 200 crore at the end of FY21 which gives company significant advantage for exploring organic as well as inorganic opportunities in the coming period. Thus going by this it would be right to say that Advance Enzyme Technologies is amazing company to explore.

Advanced Enzymes Technologies was previously suggested around 3rd November 2019 when the stock was trading around 193 Rs. Since then the stock had hit 52 week high of 504 Rs thereby delivering 161% returns.

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