Advanced Enzyme is an India enzyme manufacturing company led by Chandrakant Laxminarayan Rathi. The technical definition of an enzyme is “a substance produced by a living organism that acts as a catalyst to bring about a specific biochemical reaction”. Enzyme manufacturing companies cater to a wide variety of industries such as human health care and nutrition, animal nutrition, baking, fruit and vegetable processing, paper and pulp processing, biofuels, biomass processing and biocatalysis, etc.,
Company Website: http://www.advancedenzymes.com/
Global enzyme market is growing in single digits. The market segmentation for various areas of application shows that 34% of market is for food and animal feed folowed by detergent and cleaners (29%). Pulp and paper share 11% while 17% of the market is accounted for textile, leather and fur industries. Source: http://nopr.niscair.res.in/bitstream/123456789/17451/1/JSIR%2072(5)%20271-286.pdf
The biotech industry in India accounts for just 2% of global biotech markets and is set to grow at a faster rate when compared to the global growth rate. Even though there is a prevailing domestic demand, the segemt is largely export oriented.
Global enzymes market share is consolidated in nature with Novozymes, Danisco, and DSM dominating the overall industry demand. Novozymes is the largest manufacturing company and offers various products for household care, food & beverages, bioenergy, agriculture & feed, and technical & pharmaceuticals applications. The company puts in massive efforts to retain its market share by continuous innovation and R&D. Other industry players include Royal DSM N.V, BASF, Chr. Hansen, Enmex, Roche, Lonza Group, and Adisseo. Source: https://www.gminsights.com/industry-analysis/enzymes-market
Global leader and competitor Novozymes listed in the Forbes - 100 Corporations that will survive 100 years
- Acquisition of JC Biotech is expected to be EPS accretive for FY17
- The application and adoption of enzymes is widening to newer areas and therefore the entire market size is bound to expand
- High margin business (~45%)
- Nearly debt free business
- Niche business, not a crowded space
- Acquisition of JC Biotech
- The business is moving towards being more export oriented
- Goodwill on the balance sheet needs more investigation from people who are more experienced in reading/interpreting financials
- Too many subsidiaries (including few step down), this could be a risk but might be genuinely required for the needs of a growing biotech company
- Possible product recalls that might dampen earnings
- Technology disruption - With many global companies investing on R&D there might be unforeseen risks arising from technology disruption/innovation
The current market cap of Rs 3500 crores values the company at ~38 times TTM. As per the management commentary the company is expected to grow at 25% bottomline for many years to come. Global leader Novozymes trades at 28 times earnings and 70 billion market cap.
I have bought shares in the last one month.