Several brokerage houses have come up with their reports and recommendations ahead of Advanced Enzyme’s IPO which opens for subscription on 20 July. The IPO aims to mobilize up to INR411.5 crore while offering an exit route to Kotak Private Equity. Priced in the range of INR880 – 896 per share, the offer has mostly received positive broker ratings stating several positive aspects of the company also outlined by us in our IPO review. Nevertheless, analysts at Angel Broking say that the positives are already factored in the price. Read more to find out what broker reports are saying about this IPO.
Analysts at HEM Securities are advising investors to subscribe to the upcoming IPO. “Co is bringing the issue at price band of Rs 880-896 per share thus converting in p/e multiple of 25-26 on post issue FY16 eps of Rs 35/share. Though domestically co has no direct listed peer but if we compare it internationally then co looks reasonably priced as compare to its Novozymes. Hence, we are recommending “Subscribe” on issue,” said its research note.
Way2Wealth is also positive about Advanced Enzyme’s prospects stating that its growing capabilities and existing capacities are in place to drive the next leg of growth. The company is currently working at 45% capacity utilisation of its existing capacity of 360CBM which offers scope to double production from current levels. “A niche business model with high entry barriers and a w ell setup client base, we believe AETL’s leadership will enable the company to grow at a faster rate in the developing markets, especially India. The company has recorded a ~ 10% & ~17% 3yr CAGR in its topline and PAT respectively. At the offer price band of `880-896/- the stock trades at ~25x its FY16 EPS of `36/-. We advise clients to SUBSCRIBE to the issue,” experts noted in their IPO report note.
GEPL Capital also has a favorable view on Advanced Enzyme IPO, noting that the company will gain from operating leverage going forward. “Advanced Enzyme technologies Ltd. stands to gain from operating leverage. At a P/E of 28.4x we believe that Advanced Enzyme technologies Ltd demands a discount to its domestic peers. We assign a Subscribe rating to the IPO,” noted the research house in its note while joining the list of positive broker reports.
Angel Broking takes a neutral view
However, analysts at Angel Broking have presented an alternate view stating that the potential is already factored in Advanced Enzyme’s IPO price. In its broker reports, the brokerage house said, “AET has reported a strong CAGR of 23.9% in net profit in-spite of the 14.4% CAGR in sales during FY2012-16, helped by high entry barriers, which also enables the company to get high margins. However, we believe that the company’s scale of operations is small in comparison to its global peers and its business is dependent on few products. At `880-896/share, which is the lower and upper end of the offer price band, the company is available at ~6.1-6.2x it’s FY2017E P/BV. We believe the price fully discounts all the positives. Thus, we recommend a NEUTRAL view on the issue.”