Buy Advanced Enzyme Technologies; target of Rs 368: Emkay Global Financial
Emkay Global Financial is bullish on Advanced Enzyme Technologies has recommended buy rating on the stock with a target price of Rs 368 in its research report dated January 14, 2021.
January 15, 2021 / 01:49 PM IST
Emkay Global Financial's report on Advanced Enzyme Technologies
ADVENZY has completed the acquisition (on 11th Jan’20) of a controlling stake (51%) in SciTech Specialties Pvt Ltd. (SSPL) for a total cash consideration of ~Rs316mn. This was announced in late Dec’20. Such growth acquisition would enable management to focus on the high-margin B2C business, and presents potential cross-selling opportunities that would augment the core earnings potential of the business. SSPL, which is involved in contract manufacturing with niche technology specializing in effervescent granules and tablets, complements ADVENZY’s existing business verticals like human health, animal nutrition and food, which in turn affords operational synergies. Transaction proceeds (~Rs300mn) is intended to be deployed for capacity expansion, debt reduction, R&D and other operational improvements. Management is confident of improving the margin profile of SSPL by realizing synergies in long term. We believe that SSPL acquisition is an opportunistic move and would be a net positive for the overall earnings momentum of the business in the long run.
We raise our EPS estimates for FY22/23 by 7%/8% and raise our TP to Rs368 (+11%) at FY23E (at 20x) EPS, upgrading to Buy rating from Hold earlier (remain EW in EAP).
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