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Geojit BNP Paribas in its research report on Advanced Enzyme Technologies IPOAETL (incorporated in 1989) is the largest Indian enzyme company, engaged in the R&D, manufacturing and marketing of 400+ proprietary products developed from 60 indigenous enzymes. The company operates in two primary business verticals namely Healthcare & Nutrition (human and animal) and Bio-Processing (food and non-food). It supplies value-added and eco-safe enzyme products to diverse end-user industries like human healthcare & nutrition, animal nutrition, food processing, baking, dairy & cheese processing, fruit & vegetable processing, brewing, grain processing, protein processing, oil and fat processing, biomass processing, textile processing, leather processing, paper & pulp processing and bio-fuels. The company’s six geographically-spread & accredited manufacturing facilities enable it to produce a wide range of products catering to a diverse set of industries globally. Large production capacities coupled with a globally competitive cost base has enabled it to develop new enzymes, enzyme products and customized solutions across business verticals for the domestic as well as international markets.Advanced Enzyme Technologies Ltd (AETL) is India’s largest fully integrated enzyme company, engaged in the research & development (R&D), manufacturing and marketing of over 400 proprietary products developed from 60 indigenous enzymes. It ranks among the top 15 global companies in terms of enzymes sales and has the second highest market share in India, next only to the Denmark-based Novozymes, the world's largest enzyme maker. AETL derives ~60% of its revenue from international markets. Together, the US and Europe account for about 56% of AETL’s revenue. It has more than 700 customers spanning presence across 50 countries worldwide. Importantly, AETL has a diversified client base with top 10 customers accounting for less than 40% of total revenues. Prominent clients on the AETL list include: Sanofi India, Cipla, Ipca Laboratories, Alkem Laboratories, and Emcure Pharmaceuticals. The company operates in two primary segments of Healthcare & Nutrition (contributes 88% to the total revenue) and Bio-Processing (contributes 12% to the total revenue). Being a research driven company, it continues to invest in R&D to boost growth. AETL’s revenue & PAT has grown at a CAGR of ~14.4% & ~23.9% respectively over FY12-16. The EBITDA/PAT margin has significantly improved from 40.6%/22.3% in FY13 to 47.1%/26.7% in FY16. This has enabled the company to report robust ROE of 32.1% & ROCE of 36.5% in FY16.At the upper price band, we believe the stock is available at a reasonable valuation (26x FY16 P/E) given the specialized business model, integrated presence across the enzyme value chain coupled with strong R&D & manufacturing capabilities. Hence, we recommend “Subscribe” to the issue, with a medium-to-long term perspective.

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