Hester Biosciences Ltd Q4 FY2025 Concall Summary

Key Takeaways

• Profit growth despite flat revenue: Standalone profit rose 30% YoY in Q4 and 17% for FY25, driven by operational efficiency, better capacity use, and expense discipline, even as overall revenue was flat due to a one-time prior-year pharma export.
• Africa losses narrowing, breakeven in sight: Hester Africa cut its net loss from ₹18 Cr to ₹10.2 Cr on strong sales and tender wins; management expects breakeven in 1-2 years, with recoupment of accumulated losses taking 1-2 more years beyond that.
• Avian Influenza vaccine launch pushed to Q2: The much-anticipated launch, previously guided for Q1 FY26, is now slated for the beginning of Q2 FY26, a delay that management acknowledged but did not explain.
• BSL-3 facility still awaiting clearance: The facility built under the COVID Suraksha program remains in limbo, with management unable to share revenue potential or product plans until government agencies grant clearance, expected this quarter or next.
• What to watch next quarter: Whether the Avian Influenza vaccine launches on the revised Q2 timeline, the pace of Africa's march toward breakeven, and any clarity on the BSL-3 facility's commercial path.

Africa: The Narrowing Loss Story

• Loss reduction trajectory: Hester Africa reduced its net loss to ₹10.2 Cr from ₹18 Cr, backed by strong sales and tender wins for PPR and CBPP vaccines. Last year, an ₹11 Cr increase in Africa sales reduced losses by ₹8 Cr, showing improving operating leverage.
• New combination vaccine authorized: Received marketing authorization for a live combination vaccine (PPR plus sheep and goat pox combined vaccine), expanding the addressable tender market.
• Direct marketing push begins: Hester has started appointing its own marketing people in Africa, beginning with two managers in two countries, signaling a shift toward building its own distribution muscle.
• Egypt collaboration stalled: The partnership with Novapharma in Egypt remains at status quo due to Egypt's foreign exchange availability issues; Hester continues supplying through an exclusive distributor under its own brand name.
• Registration timelines are long: Each product takes two years to register in African countries, so the pipeline built today determines revenue years out.
• Accumulated losses: Africa's accumulated losses stand at approximately ₹45 Cr; management expects recoupment 1-2 years beyond the breakeven point.

Rajiv Gandhi: "We hope that not this year, the next year, we hope two years we should take to breakeven at Hester Africa because the African market as you understand is a very different market."

Avian Influenza Vaccine: The Delayed Catalyst

• Launch pushed back: The Avian Influenza vaccine launch, previously guided for Q1 FY26, is now expected at the beginning of Q2 FY26. Management did not explain the reason for the delay when asked.
• Preparations progressing: Despite the timeline slip, management stated preparations are progressing well and the vaccine is expected to be a key growth driver in coming years.
• H9N2 export potential: Once the H9N2 vaccine is commercially available, Hester will be able to register it in several countries and begin supplying. Management declined to name target countries, citing competitive sensitivity.
• H5N1 opportunity dismissed: When asked if an H5N1 vaccine could be made from the Africa plant, management said it can be done from the BSL-3 facility but added, "I do not see that opportunity arising... I don't see any opportunity, immediate opportunity arising out of that."

BSL-3 Facility: Waiting on Government Clearance

• Clearance bottleneck: The BSL-3 facility, created under the COVID Suraksha program, involves multiple government agencies. Management needs clearance before discussing plans publicly and expects clarity within this quarter or next quarter.
• Product plans on hold: Hester wants to manufacture its own animal vaccines requiring BSL-3 and is in discussion and planning to develop those, but cannot share specifics until clearance arrives.
• Revenue potential undisclosed: Management called it "very inappropriate to give any figure at this point of time" when asked about the facility's revenue potential over the next 2-3 years.
• Fill finish facility nearing commercialization: The fill finish facility is expected to be commercially used by Q2, latest Q3, with capitalization also targeted for Q2 this year, subject to remaining batches and regulatory approvals.

Divisional Performance & Mix

• Animal Health & Pet Care combined: The two divisions are now reported together to reflect growing synergies across Ruminant and Pet Health segments. The combined division grew 8% in Q4 and 6% in FY25.
• Animal Healthcare stable: Main contributor with stable demand for Goat Pox and PPR vaccines under the National Immunization Program; therapeutic and biosecurity product lines strengthened.
• Pet Care steady: Steady demand for therapeutics, supported by stronger veterinarian engagement and increasing prescription-driven sales. Preparing to expand into prescription diet and supplements.
• Poultry Healthcare momentum: Vaccine sales benefited from higher demand and awareness around Newcastle Disease and Marek's Disease vaccine; new feed supplements and disinfectants gaining traction.
• Tender vs non-tender split: Animal health division is approximately 50-50 tender vs non-tender; poultry business is entirely institute or chain business with no government intervention.
• Health product segment still young: Hester has been a poultry vaccine company for 38 years; the health product segment is only 10 years old. Management's focus is on growing health products to equalize the vaccine-heavy product range.

Priya Gandhi: "We are not an exact comparison to Venky's because Venky's is a poultry vaccine company while our endeavor is to be like a complete holistic animal healthcare company wherein we have various divisions."

Margins, Costs & Balance Sheet

• Profit growth drivers: Standalone profit grew 17% for FY25 and 30% in Q4, driven by improved operational efficiency, reduced wastage, better inventory control, focus on higher-margin products, and careful management of administrative and overhead costs.
• EBITDA up 8%: Reflecting better capacity use and expense discipline. Standalone gross-profit margins were stable, supported by better product mix and cost control.
• Consolidated profit up 36%: Helped by better performance from the international business, particularly the narrowing loss in Africa.
• No new CAPEX planned: Management has no concrete new CAPEX plan currently; spending will be mostly maintenance CAPEX.
• Working capital stable: Management does not envisage any new working capital add-on looking at the current situation.
• Debt manageable: Current debt repayment can be managed from operations, with cash generated at approximately ₹70 Cr.

Rajiv Gandhi: "We are very sure, rather, and we are determined in this case. We are very conscious of what question you asked. That's a question which we ourselves have in our minds to be very honest."

International Strategy & Capacity

• Africa the priority continent: Management sees no capability or bandwidth to reach out to two big continents simultaneously and has never even considered South America. Focus remains on Africa, parts of the Middle East, Central Asia, Nepal, and India.
• Nepal stable but lumpy: Hester Nepal delivered stable profits of ₹1.2 Cr, meeting both domestic poultry health demand and export demand for PPR globally. Revenue is tender-based with no pattern, so quarter-on-quarter comparisons are misleading.
• New capacity utilization ramp: Management expects utilization of the new plant to grow progressively from 10% to 30% to 60% to 70%, and is "reasonably sure" of reaching a good level of production in three years' time.
• Capacity utilization data withheld: When asked for capacity utilization across all three geographies, management declined, saying it would be "inappropriate to give any approximate figures."

Rajiv Gandhi: "We don't see our capability in terms of bandwidth to reach out to two big continents simultaneously. We are more than happy and we feel, I mean, we had never even thought of South America."

Guidance & Commitments

Key Metrics