Advanced Enzyme Technologies Ltd - The Enzyme company

HDFC is buying aggressively :slight_smile:

But again, its the promoter who sold

1 Like

why promoters are selling ?

Results are out

Sales up 38% YoY and EBITDA up 64%. EBITDA margin at 47% against 39% YoY. PAT up 91%.

3 Likes

Excellent results. Good to see HDFC raise their share to 4.28 %

1 Like

Mutual Fund holdings of Advanced Enzyme Technologies Ltd. has shown a increase from the last 3 months.

Source: https://www.rupeevest.com/Mutual-Fund-Holdings/207679

Minutes of conf call from my brain dump as I could not take notes

  • FY 19 guidance same as given last quarter that is 440-450 CR topline and 110-115 Cr bottom line

  • EVOX revenue is 30 Cr but still not profitable and may take couple of quarters.

  • Palm oil extraction to turn profitable in FY-20

  • Mentioned about some expenses on R&D which will help company to be future ready

  • This quarter saw orders diversity from various clients rather than majority order book from few big clients.

  • General response for reduction in pledge and overall debt

  • Avg tax rate to be around 26–28%

4 Likes

Advanced Enzyme Technologies Annual Report 2018 Notes:

  • Enzymes are helpful in unlocking energy requirements. In recent years, the energy trapped in otherwise unusable agricultural, industrial and domestic wastes, which are now being used in the generation of biofuels using enzymatic processes. Application of enzymes in detergents, food processing and other industrial processes allowed significant reduction in process energy requirements. In recent years, numerous energy intensive, less specific chemical processes have been replaced by the green, highly specific and efficient enzyme based biocatalytic processes. Enzymes technologies are green, highly specific energy efficient and helping in making big strides in reducing our environmental footprints.
  • Advanced Enzyme Technologies Limited (AETL) is a research driven company with global leadership in the manufacturing of enzymes and probiotics. We are the largest Indian enzyme company, engaged in the research and development, manufacturing and marketing of 400+ proprietary products developed from over 68+ indigenous enzymes and probiotics. We are commited to providing eco-safe solutions to a wide variety of industries like human health care and nutrition, animal nutrition, baking, fruit & vegetable processing, brewing & malting, grain processing, protein modification, dairy processing, speciality applications, textile processing, leather processing, paper & pulp processing, bio-fuels, bio-mass processing, bio-catalysis, etc. Our aim is to help consumers access side-effect free healthcare, help farmers enhance nutrition for animals, and also to help adopt mordern enzyme based processes.
  • Your Company’s domestic sales constitute 45% of revenue from operations during financial year 2017-18 as compared to 41% of revenue from operations during financial year 2016-17. International sales were 55% of revenue from operations as compared to 59% of revenue from operations during previous financial year. 76% revenues from Human Nutrition, 13% from Animal Nutrition, 11% from Industrial bio processing.
  • 24% ROCE, 29% ROIC, 17% ROE. EBITDA Margin of 43%, PAT Margin of 24% in FY 18.
  • Although all the efforts towards growth had an impact on margins still your Company maintained a healthy topline and bottom-line
  • With the acquisition of Evoxx Technologies GmbH, our new research & development facilities in Germany, we have made a strong investment that will steadily expand our product portfolio. This acquisition further strengthens and compliments all 4 areas of R&D: 1. Enzyme engineering 2. Microbial engineering and strain development 3. Process development and scale up 4. Application development & customer solutions.
  • We have added 20 scientists, 13 patents and 3 enzymes to our portfolio, and also added a solid base for marketing & sales into Europe.
  • While we’ve made good progress in growing the size of our business, we’ve also expanded our balance sheet, and maintained a tight rein on our debt. As of 30th June 2018, the gross debt in the company stood at ₹ 655 million, while the total cash stood at ₹ 932 million. The company intends to pay off certain portion of the debt using the surplus cash available on the balance sheet. We expect to continue investing into Research & Development, as that is the lifeline of our company. Without innovation there can be no growth. The evoxx acquisition has added tremendously to our strengths, as we build a robust pipeline for the future. The R&D expenditure is expected to go a step up, from ₹ 117 million p.a. to a range of about ₹ 180 to 200 million p.a.
  • On the Operations front, the capacity utilization continues to be in the 55-60% range. We do not expect any significant capex on this front in the foreseeable future.
  • We shall continue to focus on building a stronger Advanced Enzymes, and expect to deliver robust organic growth in FY19.
  • Enzymes Market size is estimated to exceed US$ 9.5 Billion by 2024. Proteases will worth over US$ 2.0 Billion by 2024. Health benefits offered by Protease including, boosts immune system, prevents inflammatory bowel diseases and cures skin burns & stomach ulcers will up surge this segments’ demand. The product demand in animal feed segment will be driven by key product properties including improved fodder efficiency, upkeep of gut health and lower cost.
  • Indian Industrial enzymes market is forecasted to surpass US$ 361.0 Million by 2020 on account of increasing food processing facilities, growing number of tanneries and rising textile manufacturing facilities in the country. Northern region is the largest consumer of industrial enzymes and is expected tocontinue its dominance through 2020 on account of increasing presence and anticipated expansion of food processing, leather manufacturing and textile production facilities in the region. Indian industrial enzymes market is dominated by Novozymes South Asia Private Limited, E.I. DuPont India Private Limited. Limited and Advanced Enzyme Technologies Limited(AETL).
  • Your Company’s newly acquired wholly owned subsidiary evoxx technologies GmbH is an industrial biotech company focussing on the development and production of industrial enzymes and development of oligosaccharides and polysaccharides to be primarly used in food applications. Evoxx is a Germany based company so this acquisition would give your Company a stronger foothold in Germany and in Europe. Evoxx has a team of around 20 scientists & technicians and 2 R&D locations in Germany which will help in strengthen research & development capabilities. Evoxx enhances our product portfolio and offerings for the Pharma Biocatalysis and Food Bio-Processing industries. Evoxx also brings in certain specialized nutritional carbohydrates, which expand our offerings to the US nutraceuticals market. The annual expenditure on R&D has increased from ₹ 90.0 Million (FY17) to ₹ 119.1 Million (FY18).
  • Your Company’s revenue from operations on consolidated basis increased to ₹ 3,957.0 Million in FY18 from ₹ 3,430.9 Million in FY17, a growth rate of 15.33%. The total revenue comprises International sales amounting to ₹2,168.5 Million (previous year ₹2,029.9 Million) increased by 6.83% and Domestic sales amounting to ₹1,788.5 Million (previous year ₹1,401.0 Million) increased by around 27.66%. The Company’s domestic sales constitutes 45% of revenue from operations during FY18 as compared to 41% of revenue during FY17. International sales were 55% of revenue from operations as compared to 59% of revenue from operations during previous year.
  • Financial costs increased to around ₹ 80.9 Million in FY18 from ₹ 35.8 Million in FY17. Consolidated EBITDA (Earnings Before Interest, Tax, Depreciation And Amortization including other income) margin during FY18 was ₹1,653.5 Million as compared to ₹1,533.9 Million during FY17. Profit before exceptional item and tax stood at ₹1,389.7 Million during FY18 as against ₹1,370.5 Million in the previous year. Profit after tax (before minority interest) stood at ₹935.6 Million during FY18 as compared to ₹929.4 Million during the FY18 Other Income: FY18 is ₹13.9 Million as compared to ₹25.8 Million in FY17. Cash and Equivalents in FY18 stood at ₹614.2 Million against ₹78.7 Million in FY17.
  • We expect your Company to maintain the strong revenues and profitability track record in the financial year 2018-19. Stepping ahead, your Company intends to strengthen its focus on newer applications such as palm oil extraction and biodiesel. Your Company is in the process to expand its business in the Malaysian market and the European market through its newly formed and acquired subsidiaries, to drive growth in profoundly potential markets. Your Company intends to expand its presence in the huge market available globally for Animal Feed enzymes. Your Company will continue to drive revenues by expanding its distribution network and registrations in key target geographies like North America, Europe and Latin America. Your Company also continues to explore new avenues, both organically and inorganically, to establish a significant presence in the key target segments. Your Company is continuously focusing on enzymes and probiotics to become a successful market leader in the global enzyme industry. To drive this growth, your Company is fairly comfortable with its existing capacities and capital investments. Currently, your Company is operating at 55% (approximately) of the installed capacity of its fermentation assets, which is sufficient to fulfill the present customer demands.

Originally posted on Advanced Enzyme Technologies Annual Report 2018 Notes You can find other Annual Report Summaries here too.

9 Likes

Q1 FY19 Concall Summary (source: capital market)

  • Advanced Enzyme Technologies revenue was up 38% YoY to Rs 104.3 crore in Q1FY19 against Rs 75.6 crore in Q1FY18. US, India, Asia, Europe and Others geographies grew by 72%, 9%, 38%, 38% and 176% YoY respectively
  • US contributed 51% to the top-line followed by India at 41%, Asia (ex- India) at 4% and 2% revenue contribution from Europe and 2% from Others. The company expects Europe’s revenue contribution to inch up to 9% in FY19
  • Revenue growth was driven by Human Nutrition which was up by 42% to Rs 78.8 crore forming 78% of total revenue while Animal Healthcare grew 23% to Rs 13.4 crore forming13% of revenue and Foods segment grew 20% o Rs 5.5 crore forming 5% of total revenue. This was partially offset by a decline in Industrial Processing which fell 16% to Rs 4.1 crore forming 4% of total revenue.
  • EBITDA was up 64% at Rs 48.7 crore against Rs 29.7 crore in Q1FY18. EBITDA Margin was at 47% as against 39%. Net Profit rise by 91% at Rs 31.2 crore against Rs 16.3 crore in Q1FY18
  • The company expects 13-15% revenue growth in FY19 with 43-44% EBITDA margin and PAT margin of 25-26%.
  • Going forward the company sees big opportunity in new palm oil products, revenue for which to start kicking in from FY20
  • Benefit of reduction in tax rate in the US (from 39% to 28%) will curtail the overall tax rate to a range of 26-28%.
  • Top most account contributed 16% while Top 10 clients contributed around 45% to the overall revenue
  • Human Nutrition business is likely to grow in low teens in the near term
  • Serratiopeptidase, top product of the company contributes ~25% to the overall revenue
12 Likes

Is the US subsidiary balance sheet audited ? I think now markets are very skeptical of this company.

The type of disclosure they have in their DRHP and the way they have been looping money in and around and pledging by promoters while they were buying stocks from open market,

We need to stress more on the results are genuine or not ? Who is auditing their results in different geography ? Whatever the cash generated in U.S is it coming back to india or not ?

Has any one analyzed all of it already , please share . this will save lots of time of others.

Thanks,
Amit

5 Likes

Snippets from the FY18 AR

About subsidiary auditing - standard disclaimer of the auditor

Standalone BS has Cash of just 19 lakhs

While Consolidated BS has cash of 61 Cr

They claim surplus funds are invested in FDs

However, cash and cash equivalents shows that the money is in current accounts

46%20PM

What is interesting though is that the Standalone Financial statement also shows that Current account has a cash of 61 Cr.

So perhaps the cash is in Indian current account? Perhaps.

17 Likes

Good work buddy - You did the painful work ( i was too lazy to grep these out :slight_smile: )

But why here its not showing Rs 61 Cr of Cash ?

If its not there in standalone balance-sheet , it should not be shown in the cash & cash equivalent details of Standalone balancesheet ?

It kind of seems confusing but anyways we don’t know who is auditing the subsidiaries they have. Actually these subsidiaries make most of the money for the company.

moreover its pathetic to see a company with such a high moat , Margins , ROE has only 60 Cr of Cash after 20 years of runway.
where it all went ? This is a real turn off for me. 19 lac of cash in India ? this much float is enough to run plants in india ?

I never felt comfortable with this company , always found everything rosy but on digging deeper a whole lot confusing.

Thanks,
Amit.

2 Likes

Almost everyone in the Management is a related party to the Promoters. All of them are highly paid relative to company profits. Clearly the promoters do not wish to share profits with minority holders. They seems to be running it more like their personal fiefdom. On top of it financials are not audited as there is nothing in the standalone entity worth auditing. Long term ROE is 25% and growth is less than 15%, which means company would have generated enough cash but they hardly paid any dividend. such a fancy name for a chemical company “Advanced”, “Technology”!
I found enough red flags to sell all my positions few days back.

6 Likes

Vasanth rathi promoter of advanced enzymes bought 54.20 lakh shares at 190 Rs… Worth around 102 crores… Approx of around 4.85% stake…


Edit: thanks @zoro99 for the correction.
It was bought by vasanth rathi… But at the same time atharva green ecotech sold shares…
Probably transfer of shares.

looks like promoters are doing SIP on their own stock after listing … but how come promoters have 100’s of Cr but company balance sheet have just Rs 61 Cr after 20 years of existence .

2 Likes

Its not a buy I wud say but some intra party transfer. Because there are several common directors from Rathi family in Atharva Green which sold those shares to Vasanth.

3 Likes

How TV channels fool investors. I usually watch these guys to get contra call :stuck_out_tongue:

I was watching Zee Business just few minutes back and they gave a sell rating on Adv Enzy stating Atharav Green a co promotor sold huge chunk. Other person (Anil Singhvi) when asked who bought the analyst replied that its not known. I am wondering how they lie so easily. A data which is easily available and verifiable and they are telling its not known.

5 Likes

Hi grohal,
Company have paid 5% dividend for last two years and their cash reserve have also grown pretty well in last few years whereas I also share your concern over so many subsidiaries and specially when they are not audited.
Could you please share the list of “Red Flags” you found for AETL. This may benefit fellow VPers who is also analyzing this company.
Disc: No position but considering as future look bright for this industry.

Quarterly Results out

Results and Investor Presentation

Pledging has almost halved in December Quarter: from 30.10% to 15.34%. We need to closely look at this parameter considering the current market sentiment.2019-02-07_204908

Disc. Invested

1 Like