Hester Biosciences reports 19% revenue growth, 13% EBITDA growth

Ahmedabad:  Hester Biosciences Limited, one of India’s leading animal health company, manufacturing vaccines and health products has reported consolidated revenue from operations of Rs. 67.30 crore for the Q4FY23, growth of 19% Y-o-Y from revenue of Rs. 56.47 crore in Q4FY22. Operating profit during the quarter ended March 2023 was reported at Rs. 11.67 crore, 13% growth Y-o-Y from Rs. 10.33 crore in Q4FY22.  Company has recommended dividend of Rs. 8 per equity share of Rs. 10 each (80%) for the financial year 2022-23, subject to approval of members at the ensuing Annual General Meeting.

Consolidated Financial Highlights                                                                       

Particulars Q4 FY
FY23 FY22 Change % FY23 FY22 Change %
Revenue from operations 67.30 56.47 19% 266.09 235.01 13%
Operating EBITDA 11.67 10.33 13% 50.61 59.99 -16%
Net Profit (excl. OCI) 5.71 9.01 -37% 28.04 39.48 -29%
EPS (In INR, not annualized) 6.72 10.59 -37% 32.96 46.41 -29%

(INR Crore)

Consolidated results include operations of subsidiaries from Nepal and Tanzania

Animal Healthcare Division

The Q4 sales of Animal Healthcare division got a big boost due to the demand for Goat Pox Vaccine consequent to the outbreak of Lumpy Skin Disease (LSD) in cattle. The year’s growth was also supplemented with a good growth in the sales of health products.

Poultry Healthcare Division

The Poultry Healthcare Division had a degrowth of 8% in Q4, and overall degrowth of 17% for the year. The poultry industry continues to be under pressure due to high feed costs and low product realisations leading to significantly lower new bird placements and poor collection cycles. Nonetheless, considering that we have been able to recover in Q4 compared to the yearly degrowth, we hope to see a positive trend from Q1FY24.

Petcare division:

Petcare Division, launched during the year is gaining traction. Until date, since inception of this division 9 months ago, 10 products have been launched in 15 sales territories. The market response has been very encouraging and this division is set to grow in geometric progression.

  • ~ Hester Nepal had a turnover of Rs. 12.50 crore with overall Net Profit of Rs. 2.13 crore during FY23. There was a small dip in the exports due to lower-than-expected tender invitations from FAO as compared to the previous year. However, during the year there was an 8% growth in the local poultry vaccines market, driven by our efforts in expanding the distribution channel and new product introductions While FAO tenders will start coming in for the PPR vaccine, we shall continue to focus on domestic Nepal market to generate additional revenues.
  • ~ Hester Africa has received the regulatory approvals for manufacturing PPR, CBPP, LSD vaccines for ruminants and ND and IBD vaccines for poultry. The plant is now accredited with GMP certification by the Tanzanian Drug authorities which has enabled Hester Africa to participate in international tenders. With this, Hester Africa is now prepared to commercialise in the domestic as well international markets in Africa.

Going further:

The Company’s focus on the various segments would be as follows:

Vaccines:

  1. GoI has commenced its PPR disease national immunisation program in sheep and goat. Of the total order value of INR 40.68 crore under the tender agreement, Hester has supplied INR 2.11 crore in Q4 FY23 and the balance is expected to be executed in FY24 in phased manner.
  2. An advisory has been issued by the Ministry of Fisheries, Animal Husbandry & Dairying in March 2023, to all the State departments, to carry out the annual preventive vaccination programme for LSD. Based on this, we would be carrying out awareness programs as well as promote the annual immunisation against LSD, through our Goat Pox Vaccine.

Health Products:

  1. The large market for Health Products for poultry as well as ruminants is complementary to the Vaccine market. The company will continue to grow the health products business upon introducing differentiated value-adding products, to meet the unmet as well as the emerging market needs. We will also focus on increasing the field force productivity. The market for health products is larger than that of vaccines in India and worldwide.
  2. Health products is currently the focus in the Petcare division. The Company has planned to launch new products and add new sales territories to penetrate further and drive the sales growth.

Production and capacity expansion initiatives

The commissioning of the Fill-finish facility (Drug Product) will be completed in Q1 FY24. This expansion, along with the already completed expansion of Bulk Antigen (Drug Substance) production capacity, will double the production capacity in vaccines.

Standalone Financial Highlights

Revenues

(INR Crore)

Division Q4 FY
FY23 FY22 Change % FY23 FY22 Change %
Animal Healthcare 14.67 10.16 44% 99.28 48.12 106%
Poultry Healthcare 36.55 39.89 -8% 139.17 167.38 -17%
Petcare 0.61 100% 1.77 100%
Others* 8.87 100% 8.87 100%
Product Sales 60.70 50.05 21% 249.09 215.50 16%
License & services fees 0.20 -100% 4.91 3.85 28%
Revenue from Operations 60.70 50.25 21% 254.00 219.35 16%

* includes exports of other pharmaceutical products

Profitability Analysis

Particulars Q4 FY
FY23 FY22 Change % FY23 FY22 Change %
Gross Profit margin 67% 68% -1% 68% 70% -2%
Operating EBITDA 10.92 9.85 11% 49.97 56.72 -12%
Operating EBITDA Margin 18% 20% -2% 20% 26% -6%
PAT (excl. OCI) 6.26 4.95 27% 32.34 39.52 -18%
PAT Margin 10% 10% 13% 18% -5%
EPS (In INR, not annualised) 7.36 5.82 27% 38.02 46.45 -18%

(INR Crore)

  1. ~ Overall gross profit margin reduced by 1% due to the change in product mix between vaccines and health products, health products sales having gone up.
  2. ~ Operating EBITDA increased with the increase in sales.
  3. ~ The reduction in EBITDA margin was due to the reduction in Gross Profit margin, accompanied by higher market development costs in animal health division and the new pet division.
  4. ~ Q4 PAT margin benefited from lower finance costs due to the reversal of unrealized forex loss of INR 0.65 crore on the translation of USD loan in Q4 FY23, as against a loss of INR 0.53 crore in Q4 FY22. Consequently, PAT increased by 27% from INR 4.95 crore to INR 6.26 crore.

Status of Hester’s initiative for manufacturing the Drug Substance for Covid-19 vaccine

  1. ~ Hester, in consortium with Gujarat Biotechnology Research Centre (GBRC), Government of Gujarat (GoG), has entered into an agreement with Bharat Biotech to manufacture the Drug Substance for Covaxin under the Mission Covid Suraksha Scheme of Government of India.
  2. ~ We have received the regulatory approval of the BSL-3 facility during the quarter.
  3. ~ With the covid vaccine demand going down and the Company now having a state of the art BSL-3 facility functioning, we are considering the repurposing of the facility to manufacture human or veterinary vaccines. The final decision would be taken in consultation and with approval from BIRAC, Department of Biotechnology, Government of India.

Summary:

The year gone by had mixed outcomes.

  1. ~ Sales overall grew
  2. ~ At Hester India, the dependency on Poultry Health Division reduced, in line with our long term objective to de-risk the business by ensuring all divisions and all product lines (vaccines & health products) contribute equally.
  3. ~ Hester India’s profitability did reduce. This is part of our strategy to increase sales of health products versus vaccines, again in line with our objective to ensure the reduction of relevance of any one division or product line. Nonetheless, keeping in mind our long term objective to have a healthier bottomline, we shall maintain a balance between vaccine sales and health products (specially with higher margins) to achieve our objective of higher profitability.
  4. ~ Hester Nepal’s domestic poultry vaccines market has started yielding good results, notwithstanding the increase in PPR vaccines worldwide tenders.
  5. ~ Hester Africa is now set for market penetration in Tanzania first and then for the African market.