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We scan through 100s of stocks in a year and analyze several of them to come up with few good stocks recommendations for our Alpha/Alpha + members.
Recently, I was looking at Hester Biosciences which is one of the largest poultry vaccine makers in India.
What caught my eye is that the stock is down more than 50% from its peak and is trading around the lower range of its last 10 years Price to Book valuations.
Another interesting fact is that company seems to have done a lot of expansion in the last 4-5 years and now looking at scaling up the utilization. The question is, can the performance of the company improve going forward?
Below, we have shared interesting insights from the Q3 FY 24 con-call of Hester Biosciences to understand the current situation and the outlook for the company.
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Hester Biosciences – Insights from Q3 FY 24 con-call of the company
– Q3 FY 24 performance
- Revenue: There was a decrease in revenue compared to the same quarter last year. Standalone revenue dipped by 7%, and consolidated revenue decreased by 11%
- Profitability: Gross profit margin remained steady at 67%. However, there was a slight decline in profitability with EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) down 7% and PAT (Profit After Tax) down 5%
- Comparison to Last Year: High one-time sales from vaccines like PPR and Goat Pox vaccine in Q3 FY23 boosted profitability compared to this year where sales have stabilized
– PPR Vaccine
- India manufactures PPR vaccine using the Sungri strain
- Nepal manufactures PPR vaccine using the Nigerian strain, targeting the global market (not India)
- Due to the strain difference, importing the Nepal-made vaccine into India is not considered
- The company is now focusing on: Creating demand in the private sector for PPR vaccine and Ensuring proper distribution channels to reach the end users (achieve “last-mile” delivery)
– Animal Health care division
- Observed an 18% decline in sales during this quarter compared to the corresponding quarter. 2 reasons:
- Shifting Goat Pox Vaccine (GPV) Sales Pattern: Last Year (FY23): High demand due to a lumpy skin disease outbreak in cattle, leading to concentrated sales in Q2 and Q3 (Q3 being the strongest). This Year (FY24): Sales normalized due to a planned immunization program.
- Discontinued Products: Two brands (CuRx injection and iSumovet) were discontinued due to regulations prohibiting Ketoprofen use in animals. These products generated significant sales (Rs. 4.5 crore in 9 months of FY23)
- New Product – CuRx LA: Launched in the last quarter as a substitute for CuRx injection
– Poultry Health care division
- The Poultry Healthcare division achieved an 8% growth, marking the first time in 7 quarters that the entire poultry segment has grown
- The Indian Poultry Industry is experiencing positive growth due to sustained consumer demand and stable meat/egg prices
- A modified version of the Newcastle Disease Vaccine, a critical poultry health product, has been launched in the market
- The company is acquiring technology from ICAR-IVRI to develop a modified Infectious Bursal Disease (IBD) vaccine
– Hester Nepal
- Revenue: Q3 FY24: Rs. 0.8 crore, 9 Months FY24: Rs. 8.1 crore
- Profitability: Q3 FY24: Net Loss – Rs. 0.94 crore, 9 Months FY24: Net Profit – Rs. 2 crore
- The company is emphasizing the domestic poultry business in Nepal to leverage its growth potential
– Hester Africa
- Sales – Q3 FY24: Rs. 0.73 crore in export sales (mainly LSD & CBPP vaccines to East African countries), 9 Months FY24: Rs. 4.5 crore in total export sales
- Profitability – Q3 FY24: Rs. 3.6 crore loss, 9 Months FY24: Rs. 13 crore loss
- Key markets (Egypt, Ethiopia, Nigeria) have difficulty accessing US dollars
- A rupee trade agreement only exists with Tanzania, hindering sales in other countries
- The company is increasing domestic sales efforts in Tanzania
- Hopeful for future demand for PPR vaccine from the African plant through both domestic and international tenders
– Balance Sheet
- The company’s debt levels are as follows (as of December 31st):
- Consolidated Basis: Rs. 232 crore
- Standalone Basis: Rs. 135 crore
– CAPEX
- All the vaccines that are in the pipeline, most of them do not need any additional capital expenditure
(End)
Disclaimer: This is not a recommendation to buy/sell Hester Biosciences. The securities quoted are for illustration only and are not recommendatory.
Best Regards,
Ekansh Mittal
Research Analyst
Web: https://www.katalystwealth.
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