Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hester Biosciences Ltd (BOM:524669, Financial) reported a 35% quarter-on-quarter increase in sales for the Animal Healthcare Division.
- The Poultry Healthcare Division achieved a 35% growth in Q1, driven by vaccine sales and recovery in the poultry industry.
- The Petcare Division saw a 29% growth, significantly outpacing the market growth of 9%, driven by increased penetration among vet clinics.
- Hester Nepal generated positive cash flows and fully paid all bank term loans, despite a slight dip in turnover.
- The company reported a 30% increase in profit, with both EBITDA and PAT showing growth due to high-margin products and improved operational efficiency.
Negative Points
- Overall sales showed a 9% decrease due to a one-time pharmaceutical product sale in the previous year.
- Hester Africa ended the quarter with an overall loss of INR4.9 crores, primarily due to depreciation and unrealized foreign exchange fluctuations.
- The capacity utilization in Africa is currently only at 10%, indicating underutilization of resources.
- The company faces challenges in regulatory standards, which can delay the launch of new vaccines like the Lumpy Skin Disease vaccine in India.
- There is a dependency on external factors for the timely launch of new products, which can impact the company's growth trajectory.
Q & A Highlights
Q: We have seen a drop quarter-on-quarter in the Poultry Division. Can this be attributed to higher maize prices and low broiler prices in Q1? How is the Poultry Division impacted by this?
A: Rajiv Gandhi, CEO & Managing Director: The Poultry Healthcare Division saw a 35% growth in Q1. The current dip in broiler prices is a cyclical issue due to the Shravan month. Overall, the poultry industry is in a better situation compared to the last two years, and feed costs have marginally decreased. We are not seeing any negative trends impacting our business.
Q: What is the maximum revenue potential from Nepal, Africa, and India units, and what is the current capacity utilization in all three?
A: Rajiv Gandhi, CEO & Managing Director: In Africa, the total utilization could give us approximately INR60 crores in sales. In Nepal, we have a turnover of INR6.3 crores in Q1. In India, we are utilizing around 80% of our capacity, and with the new capacity coming in Q3, our utilization will be around 45%.
Q: What is the outlook for FY25 in terms of growth and margins?
A: Rajiv Gandhi, CEO & Managing Director: We are on an upward trend in both top line and bottom line. Priya Gandhi, Executive Director: This quarter has shown a rise by 37% in divisional sales, setting a strong foundation for the year. We aim to maintain this performance throughout the financial year.
Q: What is the current breakup between vaccine and product revenue, and how is the margin profile in each?
A: Rajiv Gandhi, CEO & Managing Director: We prefer not to give a detailed breakup. However, the vaccine business is currently larger than the health products business. Vaccines are relatively more profitable than health products.
Q: How is the Africa business performing, and what are the expected numbers? Has the currency devaluation stabilized?
A: Rajiv Gandhi, CEO & Managing Director: Africa is showing positive signs with orders expected in the coming months. The currency devaluation is a routine issue and not a major concern. We expect a geometric progression in our African market performance.
Q: When are you targeting to launch the low pathogenic Avian Influenza Vaccine in India and outside India?
A: Priya Gandhi, Executive Director: We are planning to launch it in Q4 this year or Q1 next year. Rajiv Gandhi, CEO & Managing Director: The potential for this vaccine is significant, especially in exports.
Q: What is the key advantage of the new Brucella vaccine over existing ones, and when do you expect to launch it?
A: Priya Gandhi, Executive Director: The new Brucella vaccine will be a recombinant modified version, ensuring higher safety for humans and better performance in cattle. Rajiv Gandhi, CEO & Managing Director: It will be safer for humans vaccinating the cattle without reducing efficacy.
Q: What is the revenue contribution from Africa, and is it a higher-margin business compared to India and Nepal?
A: Rajiv Gandhi, CEO & Managing Director: Africa contributed INR2.8 crores out of the consolidated total turnover of INR82 crores. The gross margins are in line with our India business.
Q: How much investment has been made in the Africa subsidiary?
A: Rajiv Gandhi, CEO & Managing Director: The total investment in Hester Africa, our plant in Tanzania, is USD20 million.
Q: What is the key difference between the lumpy skin disease vaccine developed in India and the one launched in Africa? When will the updated LSD vaccine be launched in India?
A: Rajiv Gandhi, CEO & Managing Director: The African LSD vaccine uses the Neethling Strain, while the Indian version uses a strain isolated by IVRI. The Indian LSD vaccine is expected to launch in late 2025. Currently, we are supplying the Goat Pox Vaccine, which provides high immunity against LSD in cattle.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
