Advanced Enzyme Technologies Limited — Q3 FY25 earnings call

Call held 12 Feb 2025

Management summary

Advanced Enzyme Technologies reported a mixed Q3 FY25, showcasing strong sequential and year-on-year growth in revenue and EBITDA, driven by robust performance in Bioprocess and Specialized Manufacturing segments. However, year-to-date revenue growth remained modest, and the company anticipates flat sales in India for FY25. Strategic focus includes nutraceuticals, R&D, and potential acquisitions, while navigating global economic uncertainties and competitive pressures.

Highlights

  • Q3 FY25 Revenue of Rs. 169.1 crores, up 16% QoQ and 5% YoY.

  • Q3 FY25 EBITDA of Rs. 55.3 crores, up 30% QoQ and 3% YoY.

  • EBITDA margin maintained at 33% in Q3 FY25.

  • Bioprocess segment revenue grew significantly by 91% QoQ and 36% YoY.

  • Specialized Manufacturing segment revenue grew robustly by 28% QoQ and 49% YoY.

Concerns

  • Nine Months FY25 YTD Revenue growth was modest at 1% YoY (Rs. 469.7 crores vs Rs. 466.1 crores).

  • Nine Months FY25 YTD sales of the largest product, anti-inflammatory enzyme, declined to Rs. 89 crores from Rs. 103.1 crores.

  • India sales are expected to have no growth for FY25 due to market share loss in anti-inflammatory and other areas.

  • US market growth described as 'flattish' with annual revenue around Rs. 180-200 crores.

Key financials

  1. Revenue ₹169.1 Cr +5%YoY
  2. EBITDA ₹55.3 Cr +3%YoY
  3. EBITDA Margin 33%
  4. PAT Margin 23%
  5. R&D Spend ₹8.1 Cr

What they filed

Q1 FY27: revenue down 7.2%, net profit down 70.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue77 101 87 125 116 +51%96 −5%116 +33%116 −7%
EBITDA14 22 14 31 30 +114%23 +5%27 +93%30 −3%
Net profit9 15 11 74 22 +144%13 −13%22 +100%22 −70%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Human Nutrition
    60% Revenue Contribution
  • Animal Nutrition
    12% Revenue Contribution22% Revenue Growth9% Revenue Growth
  • Bioprocess
    19% Revenue Contribution36% Revenue Growth91% Revenue Growth
  • Specialized Manufacturing
    9% Revenue Contribution49% Revenue Growth28% Revenue Growth
  • Pharma India
    ₹46 Cr Revenue
  • International Human Health Care
    ₹55.9 Cr Revenue

Capital allocation

high confidence
  • Liquidity Cash ₹600 Cr The company has approximately Rs. 600 crores cash on its books, with US cash providing good returns and rupee depreciation benefits.
    And sir, last question. Sir, any plans to utilize the cash like 600 crores that we have on our books or any plans to, also any plans to bring the cash parked in the U.S. back to India? ... So, as far as, you know, getting money back from U.S. is concerned, you know, we are getting a good return from that for whatever we have invested in USA. And apart from that utilization, yes, at appropriate time, you know, whenever there are like ways to utilize like we have been giving an incremental dividend to our investors and apart from that, if there will be an opportunity of acquisition, which as we have mentioned earlier this fits to our strategic planning, then that money will be utilized.

Guidance & targets

Revenue

  • Overall Revenue Growth Revenue · FY25 · High confidence small single-digit growth
    this year we already clarified that we will have just a small single-digit growth, and for the next year, we will come back into the next quarter.

    — Mukund Kabra

  • Overall Revenue Growth Revenue · FY26 · Medium confidence higher growth

    — Mukund Kabra

Capacity

  • Nashik R&D Facility Commissioning Capacity · end of CY25 · High confidence commissioned
    I think we were talking about end of this year '25. Not the financial year, but this year.

    — Mukund Kabra

Product Pipeline

  • New Molecules Added Product Pipeline · annually · High confidence 5 to 6 molecules
    We do add one or two molecules each quarter roughly at this time. That is the pace at which we are going on.

    — Mukund Kabra

Product Approvals

  • Probiotic Product Approvals Product Approvals · Medium confidence expected
    and we are expecting some of the products to be approved by the various different regulatory agencies in various different markets.

    — Vasant Rathi

What to watch in Q4 FY25

Overall Revenue Growth for FY26

Next quarter (for updated guidance)
Current Small single-digit growth expected for FY25
Target Return to higher growth

Why it matters

Indicates the company's ability to recover from current modest growth and achieve its long-term aspirations.

this year we already clarified that we will have just a small single-digit growth, and for the next year, we will come back into the next quarter.

Risks & concerns

  • Global Economic Uncertainty

    medium

    US elections, potential tariffs, geopolitical tensions, and trade war risks create uncertainty for global economic stability.

    Management acknowledged

  • Competitive Landscape and Product Replication

    medium

    The enzyme and probiotic sector is niche but highly competitive, with companies monitoring each other, posing a risk of product replication if details are revealed.

    Management acknowledged

  • Inflated Acquisition Valuations

    medium

    Companies are demanding inflated valuations for M&A targets, making strategic acquisitions challenging.

    Management acknowledged

  • US Regulatory and Policy Changes

    medium

    New political situations and policy changes in the US could impact the global economy and trade landscape.

    Management acknowledged

  • Flat India Sales Growth for FY25

    medium

    The company expects no growth in India sales for FY25 due to market share loss in anti-inflammatory and other areas.

    Management acknowledged

Q&A highlights

7 direct
Sales Growth Reconciliation and FY25 Outlook Direct
No, I think as far as, you know, guiding two-digit growth, we already mention that we will be having only single-digit growth. Let me clarify first. And then as far as the impact of, you know, the recognition of revenue, I think Mukund has already explained that in this quarter instead of Rs. 159 Crore, if we reduce that impact, it would have been Rs. 161 crore for this quarter and last quarter where it was Rs. 146 crore, it would have been Rs. 154 crore. So, you have some 5% of growth in that sense. But overall for 9 months, we have only 1% of growth. But I think that we already mentioned in the Q2 call.

Clarifies the actual adjusted QoQ growth and reiterates the single-digit growth expectation for FY25, addressing analyst concerns about prior guidance.

Asked by Viraj

FY26 Growth Profile and Outlook Direct
So, we are in the process of budgeting right now for the next year and we will come out with the scenario at the end of the fourth quarter results. And this year we already clarified that we will have just a small single-digit growth, and for the next year, we will come back into the next quarter.

Provides a forward-looking statement on expected growth acceleration in FY26 after a modest FY25.

Asked by Viraj

Serratiopeptidase Competitive Landscape Direct
So, as we all know, like we were the leading player, we still are the leading player, but when you are the leading player, it's always difficult to hold more than 90% of the market share. There will be some market share here and there, which will happen, but as of now, still we are the leading player into this segment.

Acknowledges competitive pressures and market share shifts in a key product segment while asserting continued leadership.

Asked by Viraj

Nashik R&D Facility and Product Pipeline Direct
So, Dr. Gupta left long back. It's already like 3.5 years. And there are always the players who are there. R&D is in a good hand. There are many capable people who are handling those. In terms of Nashik R&D, when we talk about Nashik R&D, it will be 3x bigger than what we have in the first stage at present. That is our goal to begin with. There are few recruits we already did and we are in a process to recruit further. In terms of the addition of products, we already mentioned during our last few calls that every year we add at least 5 to 6 molecules, and we will continue to add and we will increase this pace as we move on.

Provides updates on R&D leadership, the scale of the new Nashik facility, and the company's consistent pipeline of new molecules.

Asked by Bhavya Nahar

Cash Utilization and US Cash Repatriation Direct
So, as far as, you know, getting money back from U.S. is concerned, you know, we are getting a good return from that for whatever we have invested in USA. And apart from that utilization, yes, at appropriate time, you know, whenever there are like ways to utilize like we have been giving an incremental dividend to our investors and apart from that, if there will be an opportunity of acquisition, which as we have mentioned earlier this fits to our strategic planning, then that money will be utilized.

Explains the rationale for holding cash in the US and outlines potential uses for capital, including strategic acquisitions.

Asked by Bhavya Nahar

US Market Growth and Future Guidance Partial
What we understand is clearly U.S. has been the key market for us since a very long period of time, but like the earlier participant also mentioned somehow the growth has been flattish. We are stuck at around 180-200 crore annual number. So, if you are actually seeing traction from the customers and, you know, higher visibility, what stops us for giving guidance from next one or two years' perspective, at least a range that would actually help? So, that's the first question. ... Overall, we see a very positive trend as far as our product penetration is concerned, new products development is concerned, various different research papers and products which we are coming up with. So, yes, we are looking at growth numbers will tell a little bit later.

Highlights the ongoing challenge of flat growth in the key US market and management's cautious approach to providing future guidance due to market uncertainties.

Asked by Abhishek Navalgund

Capacity Utilization and Asset Turn Direct
We still have still like lot of capacity. Our utilization is almost like 55-60% still. We are at the same level. We will wait and see when we need to expand. As we were saying earlier as well, whenever we reach to 80% of the capacity levels, we will go for the expansion.

Provides insight into current manufacturing capacity utilization and the trigger for future expansion plans.

Asked by Niharika

India Sales Growth for FY25 Direct
So, Niharika, depending on looking at all the numbers what we saw last year and when we were like recalculating, revisiting all the projections, we realized that probably this year there will not be any growth. We did add some customers, but at the same time, we did lose some of the market share, particularly into the anti-inflammatory area and some of the other areas.

Explains the reasons behind the expected flat sales growth in India for FY25, pointing to market share dynamics.

Asked by Niharika

3 min read 7 chapters

Detailed narrative

Q3 FY25 Financial Performance Overview

Advanced Enzyme Technologies reported a Q3 FY25 revenue of Rs. 1,691 million (169.1 crores), marking a 16% sequential growth and 5% year-on-year growth. EBITDA for the quarter stood at Rs. 553 million (55.3 crores), increasing by 30% QoQ and 3% YoY, with an EBITDA margin of 33%. The reported revenue included an Rs. 80 million recognition from Q2 FY25, which, when adjusted, still showed a 5% QoQ growth. The company's PAT margin for Q3 FY25 was 23%.

Segmental Growth Drivers

The Bioprocess segment was a significant growth driver, contributing 19% to the total revenue and growing 91% QoQ and 36% YoY. Specialized Manufacturing also demonstrated robust performance, accounting for 9% of revenue with 28% QoQ and 49% YoY growth. Animal Nutrition contributed 12% to revenue, growing 9% QoQ and 22% YoY, while Human Nutrition remained the largest segment, contributing 60% of Q3 revenue.

R&D and Product Pipeline Expansion

The company maintains a strong focus on R&D, with a consolidated spend of approximately 5% of revenue in Q3 FY25 (Rs. 8.1 crores). They aim to add 5 to 6 new molecules annually to their product pipeline. A key development is the establishment of Starya Labs, a US subsidiary dedicated to enzyme and probiotic testing. The Nashik R&D facility is planned to be three times larger than its current stage and is targeted for commissioning by the end of calendar year 2025.

Strategic Focus on Nutraceuticals and Probiotics

Advanced Enzyme is strategically deepening its footprint in the nutraceutical ingredient sales market, with a particular focus on gut health, protein powders, and pet supplements. The probiotics market, estimated at $70 billion, is a key area of interest, with the company actively pursuing product development, publishing papers, and filing patents. They anticipate regulatory approvals for some of their probiotic products in various markets.

Challenges in Key Markets: US and India

Despite strategic initiatives, the company faces challenges in its key markets. The US market has shown 'flattish' growth, with annual revenue around Rs. 180-200 crores, influenced by global economic uncertainties and potential regulatory changes. In India, the company expects no growth in sales for FY25, primarily due to market share loss in the anti-inflammatory enzyme segment and other areas, necessitating a re-evaluation of projections.

Capital Allocation and Acquisition Strategy

The company holds approximately Rs. 600 crores in cash on its books. Management indicated that cash held in the US provides good returns and benefits from rupee depreciation. They are committed to utilizing this capital for strategic acquisitions that align with their long-term growth objectives, focusing on enhancing capabilities, intellectual property, and market access, despite facing challenges from 'inflated valuations' in the M&A landscape.

Sales Force Expansion and Market Strategy

To address growth concerns and enhance market penetration, Advanced Enzyme is aggressively expanding its sales force and distributor network. Management emphasized that their products are highly technical, requiring a significant learning curve for sales personnel. The company prioritizes delivering exceptional service and quality over aggressive pricing strategies to maintain brand reputation and ensure long-term growth and stability.

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