One of India’s leading poultry and animal vaccine manufacturing company, Hester Biosciences Limited has reported consolidated net profit of Rs. 3.56 crore and Revenue from Operations of Rs. 50.70 crore for the Q1FY23. Individually, the gross margins of the vaccines and the health products have been in line with the corresponding quarter, however, the overall margins have reduced due to the increase in the proportion of health products sales which have lower gross margins compared to vaccines. Health Products sales constituted 34% of the total sales in Q1 FY23, versus 20% in Q1 FY22.
Hester Tanzania has recently received regulatory approvals for four products with two additional products under approval process. Hester Tanzania has just started commercial operations and Revenues are expected to start in Q2. Hester Nepal has registered 16% growth in domestic revenues, however, there were no tender sales in the current quarter due to delay in tendering by FAO and other multilateral institutions.
Consolidated Financial Highlights (INR Crore)
|Revenue from operations||50.70||60.19||-16%||235.01|
|Net Profit (excl. OCI)||3.56||11.02||-68%||39.48|
|EPS (In INR, not annualized)||4.19||12.95||-68%||46.41|
- Operating EBITDA and PAT margin have declined due to :
(a) Reduction in vaccine sales as explained above
(b) Relative increase in marketing expenses in Q1 FY23 as against in Q1 FY22 which were significantly lower due to Covid travel restrictions (notwithstanding the higher sales in Q1 FY22 due to disease situation in poultry)
(c) Increased market development cost in Animal Health and Petcare Divisions on account of company’s continuous efforts in expansion activities. These are expected to moderate over next few quarters as growth in sales picks up in new territories.
Going further – The company is confident of arresting the degrowth in Q2 as well as hopes to improve the profitability as follows:
On the vaccine side:
- The recent outbreak of Lumpy Skin Disease (LSD) in certain parts of the country since July 2022 is expected to result in additional sales in Q2 FY23.
- The Company was a successful bidder in a government tender for PPR vaccine for sheep & goat, the supplies for which are likely to start from September 2022.
On the Health Product side:
It is our endeavour to improve the profitability. Over next couple of quarters, Hester will focus on growing sales on back of improving the sales productivity of the marketing team as well as launching new products and entering new territories.
The Company launched a new division for Petcare during Q1 with 10 products. Activities related to market development, field force establishment and product pipeline are ongoing. Petcare Division will emerge as a steady long term growth driver, given the increasing adoption of pets in the country.
Status on Hester’s initiatives in Covid-19 vaccine
- The Company, in consortium with Gujarat Biotechnology Research Centre (GBRC), Government of Gujarat (GoG), has entered into a term sheet agreement with Bharat Biotech India Limited to manufacture the Drug Substance for Covaxinunder the Mission Covid Suraksha Scheme of Government of India.
- The project is to manufacture Drug Substance equivalent of up to 7 million doses per month.
- The construction of BSL-3 facility is nearing mechanical completion.Planning andpreparation for commissioning is ongoing. The facility is expected to be ready for commercial operation in Q3FY23.
- This facility is a multi-purpose facility to handle other micro-organisms beyond Covid-19.
- The Company is strengthening its new product vaccine pipeline by developing new vaccines like Classical Swine Fever (CSF), Sheep Pox and an improved version of Brucella vaccines.
- Bulk antigen production capacity expansion project is completed and trial runs are ongoing. Expansion of Fill-Finish line capacity is expected to be completed by Q4FY23. These 2 expansions will double the production capacity in vaccines.
- The recent notification by Government of India to allow the manufacture and sale of Avian Influenza Inactivated vaccine, H9N2 strain, will contribute to our sales from Q3.
Standalone Financial Highlights
|License & services fees||3.95||3.65||8%||3.85|
|Revenue from Operations||50.53||58.51||-14%||219.35|
Product Category Revenues
|Total Product Sales||46.58||54.86||-15%||215.50|
- Vaccine sales declined by 30% in Q1 FY23 compared to the corresponding quarter, largely due to two reasons:
- The comparative period last year had hugely benefited from one-off sales on account of the then prevailing poultry disease outbreak. Our sales were near to a record high due to the outbreaks.
- The decline was in the sales of poultry vaccines in Q1 FY23. The poultry industry continued to face strong headwinds on account of increased cost of inputs (mainly feed) and pricing pressureon eggs and broiler birds. Consequent to severe margin pressure, the poultry industry sharply reduced new bird placementsalong-withinitiatives towards input cost optimisation.
- Sales of health products grew by 42% on back of a strong momentum gained from new product introductions and territorial expansion.
|Particular||Q1 FY23||Q1 FY22||Change||FY22|
|Gross Profit margin on product sales||65%||69%||-4%||71%|
|Operating EBITDA Margin||18%||31%||-13%||28%|
|PAT (excl. OCI)||5.01||12.24||-59%||39.52|
|EPS (in INR, not annualized)||5.88||14.38||-59%||46.45|