Advanced Enzyme Technologies Ltd – CMP – 409
Recommendation: Buy
Fundamental Grade : A Grade (Good Safety)
Brief about the company:
Advanced Enzyme Technologies Limited is engaged in the business of manufacturing and sales of enzymes. AETL is a research-driven global player in the manufacturing of enzymes and probiotics. The company is having more than 400 enzyme products which find its application in Human health care and nutrition, animal nutrition, baking, fruit and vegetable processing, brewing and malting, grain processing, protein modification, dairy processing, specialty applications, textile processing, leather processing etc.
Performance during Last 5 years:
Revenue grown at a CAGR of 7% and profit grown at a CAGR of 4% during last 5 years. Whereas share price reported CAGR return of 21%during this period. Return on equity for the past 5 year is above 14%.
Future Outlook:
The company lost one of its major client during May-2021 which contributed to muted performance during FY 2022 and FY 2023. Now, sales of the company recovered and profitability also started to show improvement. The company expects the following factors to contribute towards increased consumption of enzymes: Ageing Population, Increased focus towards chemical-free processes, Growing prevalence of digestive disorders, Prioritisation of a healthier lifestyle. The company expects around 10% CAGR growth in revenue and around 20% CAGR growth in profit.
Valuation
At CMP, the stock is trading at PE of around 33 and P/B of around 3.6 which is reasonable considering the improved growth outlook. Further, the market capitalization is around 30 time cash flow which is also reasonable. The stock did not appreciate during past 3 years due to loss of client and lower growth. Now, since growth outlook is improved, we may considering buying the stock at current price. Keep a watch on promoter shareholding as it is coming down gradually.