Hester biosciences Q4FY17 Concall Summary

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Financial Highlights

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  • Most of the company’s revenue is from poultry vaccines, as it started the same in 1997. The poultry vaccines business grew about 19%. On the exports side the company grew at 44% & estimated growth of 100% on domestic sales. Overall there was 21% better than planned growth
  • Total sales in the Q4 FY17 is recorded at INR 34.93 crores as against INR 28.18 crores in Q4 FY16 thereby achieving a growth of 23.95% compared to Q4 FY16
  • Total sales for the year ended FY17 is recorded at INR 123.22 crores as against INR 100.89 crores in year ended FY16, thereby achieving the growth of 22.13%
  • Company's total domestic sales is INR 106.69 crores in year ended FY17 as against INR 88.22 crores in year ended FY16 thereby an increase in domestic sales by 20.95%
  • Company’s total export sales is INR 14.43 crores in year ended FY17 as against INR 10.02 crores in year ended FY16 thereby an increase in export sales by 44.01%
  • EBITDA is achieved at 33.30% for Q4 FY17, while in the year ended FY17 EBITDA is achieved at 33.22% as against 33.10% in FY16
  • Net profit is achieved at 20.25% for Q4 FY17 as against 19.53% in Q4 FY16. While in the year ended FY17 net profit is achieved at 20.16% as against 19.05% in the FY16
  • Fixed assets turnover in FY17 stood at 1.50 times as against 1.40 times in FY16
  • Inventory level decreased by 23 days and stood at 97 days in FY17 as against 120 days in FY16
  • Total receivables decreased by 16 days and stood at 78 days in FY17 as against 94 days in FY16
  • Overall, working capital cycle decreased from 107 days in FY16 to 66 days in FY17
  • Company has invested Rs 15.31 crores in FY17 on Capex
  • ROCE stands at 24.06% in FY17 as against 20.69% in FY16
  • ROE is at 20.75% in FY17 as against 19.16% in FY16
  • ROI stands at 13.52% in FY17 as against 12.10% in FY16
  • The board of the directors had declared and paid interim dividend of Rs. 3 per equity shares on 20th October 2016. Further, the board has recommended a final dividend of INR 2.30 per equity shares
  • Total dividend for the financial year FY17 will be Rs. 5.30 paisa per equity shares, resulting into total payout of 18.15% of PAT as per company’s dividend payout policy
  • EPS for the Q4 FY17 is INR 8.32 per share as against INR Rs. 6.47 per share for Q4 FY16 whereas annualized EPS for FY17 is INR 29.20 per share compared to INR 22.60 per share for FY16
  • The exports estimates is based on the registration mainly on the registration activities & partly on the tender. The company cannot control the registration time, some time it is fast & sometime it is slow. It is a cycle which the company has to follow. In Q4FY17 the company got quiet a few registration & again it believes that there will be good spurt in business

 PBR tender business

  • The PBR Tender business which it started is slowly picking up
  • On the poultry front, it has been a steady growth, a little more than the forecasted growth because of having a good market share, a good product line. On the large animal side, the company did a little better, being a smaller division, yes the growth rates have to be higher.
  • The company is reasonably confident that it will grow the business at approximately 50% at least in this current financial year.

Diagnostic Business

  • There has been delay in launch of diagnostic business & will be launched in Q1 of this financial year. It is hoped that this division settles by Q2-Q3 from where we would start generating sales. The company is very confident that the profitability in this division should be reasonably better than the average profitability of the other divisions. The company is doing some seed marketing, test marketing, for a proper forecasting system
  • The company has made little improvement in the bottomline as well as sales growing at 24% & in the year end at around 22%
  • Earlier the company rushed into production once the order is received but now it is streamlined the process to at least ensure the profitability that is derived from each of the production batch.

International developments

  • Commercial production in Nepal started in the end of last calendar year.
  • Focusing on additional tender business as well as the domestic sales from the Nepal plant
  • Company focus is on Africa in this financial year & in this year it has developed strong distribution network mainly in Eastern Africa & then going further to southern part of Africa & then to Western Africa. The distribution network will be in place in 3-4 months
  • It wants to make deeper penetrations into African market


  • Company has spent 6% of its topline on R&D expenditure which has been a little higher than earlier years & continue its spending between 6-8% approximately in this financial year
  • It intends to roll out in this financial year is the thermostable PPR vaccines. It is mainly to immunize goat & sheep in the backward area
  • The vaccines have passed laboratory test & will launch it in couple of months
  • In Q4 the business has grown on the topline at around 22%. It is planning growth of over 30% in this financial year
  • The company’s operation is divided into 4 verticals
    • Poultry vaccines
    • Poultry health products
    • large animal vaccines
    • large animal health products

 Poultry vaccines division

  • Company has booked sales of 27.61 crores in Q4 FY17 as against INR 23.98 crores in Q4 FY16
  • Sales for the year ended FY17 has booked at INR 102.24 crores as against INR 85.47 crores in year ended FY16

 Poultry health division

  • sales booked at INR 1.15 crores in Q4 FY17, sales for the year ended FY17 has booked at INR 3.68 crores as against INR 3.37 crores in year ended FY16
  • Overall 23.01% growth is registered in Q4 FY17 as against Q4 FY16. While 19.22% growth is recorded in the year ended FY17 as against year ended FY16. 

Large Animal vaccines division

  • Company has booked sales of INR 4.51 crores in Q4 FY17 as against INR 2.07 crores in Q4 FY16
  • Sales for the year ended FY17 has recorded at INR 6.83 crores as against INR2.13 crores in year ended FY16

Large Animal health products division

  • Company has booked sales of INR 1.66 crores in Q4 FY17 as against INR 1.88 crores in Q4 FY16. Sales for the year ended FY17 has recorded at INR 8.37 crores as against INR 7.26 crores in FY16
  • Under large animal division, overall 84% growth is registered in Q4 FY17 as against Q4 FY16 while annually 61.84% growth is recorded for FY17 as against year ended FY16

Results of Standalone Hester Biosciences Nepal

  • Nepal plant has been commercialized on 15th November 2016
  • The company is 65% JV partner in Hester Biosciences Nepal Pvt ltd
  • Company’s total equity share capital is INR 11.87 crores on year ended FY17
  • Total sales for the year ended FY17 is recorded at INR 1.31 crores
  • Total pre-operating expenses for the year ended FY17 is INR 3.77 crores
  • Company has booked total loss of 2.14 crores in FY17 hence total accumulated losses of the company is 2.23 crores at the year-end of FY17
  • Total debt finance from the bank is INR 26.79 crores in FY17. Total fixed assets investment capitalized is INR 43.40 crores in FY17
  • The company has got registration from Africa mainly from 2 vaccines from Kenya, 3 vaccines from Uganda, 1 in another country
  • The company proposes that with more products lined up, the possibility to get business even for the vaccines registered earlier becomes higher
  • The thermostat PPR vaccines can retain efficacy even in higher temperature
  • For Nepal plant the fixed cost investment capitalizes to 43.40 crores & total preoperative expenses is 3.77 crores. The company has booked these profits
  • Fixed cost for Nepal plant starting FY18 is 2.5 crores for the year on the administrative side. Other expenses like Interest & all. The company has booked the debt around 26 crores & rate of interest is 9. So 5 to 6 crores will be total fixed cost for the year FY18
  • The company says that the delay in Tender is not under its control & it is not dependent on the company
  • There are other non tender business also which company is looking, but the registration process again from Nepal takes as much time as what it takes from India. Hence there involves gestation period for non registration business
  • The company hopes sales from Nepal plant to cost 10 crores

Future Outlook

  • The company has forecast growth of 15 for the poultry side in domestic market
  • The company is still not wanting to commit capex to African plant. It will commit once it is sure of the whole project
  • The company is making small investment in a company in Mehsana of around 2.63 crores which is yet to be paid out. With this investment, the company will have a controlling interest in that company, it will also be able to control product supply
  • The manufacturing expenses have declined in FY17 from Rs 16.8 crores to 15 crores mainly due to product mix, differential cost of production, manufacturing cycle
  • The company has been making strong efforts to lower working capital & it hopes to be efficient in fiancés
  • The company has not many products in pipeline but 2-3 products. The company plans to launch 20 products this year. Mainly medicines, feed supplements, disinfectants
  • The company is going to tender in India for a quantum amount of 20 lakhs to 12 crores per tender. It depends upon country to country
  • The company expects doses of around 5 or 6 billion & would go up by approximately anything between 15-22% depending upon the product mix
  • The company has estimated capex of 15-16 crores
  • The company does not have monopoly in any markets. It is putting its own infrastructure, distribution. Hence accessibility to markets by its own team without depending on other distribution network will be advantage
  • Any vaccine in the world which has a different composition has to have new registration
  • The company is looking at a market of Rs 150 crores in Africa
  • In India the company is looking at market of around Rs 100 crores
  • The company has no plans developing human vaccines
  • The company has still no plans to come up with QIP as it believes that lesser equity the more returns to the investor
  • The company has actively been looking for acquisition in Europe but is not aggressively
  • For 2020 the company has a vision of turnover of Rs 1000 crores. The company is expecting a growth of around 20-23%
  • The company does not see the outbreak of poultry flu as risk because vaccine does not depend upon an outbreak. Vaccine is preventive medication which has to be given irrespective whether there is outbreak or not