Hester Biosciences Ltd Q3 FY2026 Concall Summary

Key Takeaways

• Poultry drives the quarter, Animal Health drags: Poultry Healthcare grew on deeper penetration and sustained vaccine demand, while Animal Health declined due to delayed government immunization programs and seasonal headwinds.
• Profitability step-up, management says it sticks: EBITDA improvement came from favorable product mix and cost discipline; management stated the forecasted profitability is even higher than current levels and they are determined to at least keep it.
• H9N2 vaccine licensed, market size unknown: Both marketing and manufacturing licenses received post quarter end, but management declined to quantify the opportunity, calling it an upcoming market with no organized data.
• Fill/finish capacity doubled, utilization story ahead: The new facility is capitalized and doubles drug product capacity; returns are expected to accrue progressively as utilization increases, with no specific contract manufacturing deals disclosed.
• What to watch next quarter: Whether government immunization programs actually commence from February as guided, the pace of fill/finish capacity utilization, and any concrete progress on petcare licensing or BSL-3 repurposing.

Segment Performance

• Poultry Healthcare: Growth driven by deeper market penetration, improved placement, stronger distribution coverage, and sustained demand for the core vaccine portfolio. Management pushed back on the idea that bird flu in Kerala drove the revenue jump, stating it had nothing to do with these numbers.
• Animal Health: Decline primarily from delays in government-led immunization programs in the ruminant segment, particularly PPR and goat pox vaccines. Seasonal factors compounded the weakness: lower incidence of clinical cases, higher feed costs affecting feed supplement performance, and reduced cooperative milk prices influencing purchasing behavior.
• Africa: Q3 impacted by a timing delay in institutional order execution and higher operating costs, though 9-month performance remained positive. The strategy has evolved from opportunity-led participation to structured execution with sharper focus on working capital discipline and selective geographic exposure. Products registered in neighboring countries aim to widen the addressable market.
• Nepal: Operating through a challenging phase.
• Other operating income: Part includes brand income linked to development milestones under the GALVmed-supported program for a combined PPR goat pox vaccine; funding is released against defined technical milestones, with the objective being to advance science and enable access rather than near-term commercialization.

Profitability & Margins

• EBITDA step-up: Improvement driven by product mix choices and profitability of products; management is conscious of improving the bottom line by pushing products that impact profitability positively. The endeavor is to improve margins but there is no guarantee every product mix will yield the same margin.
• Sustainability claim: Management stated the profitability forecasted is even higher than current levels and they are determined to at least keep this profitability. When pressed on whether the INR20 crores quarterly EBITDA is sustainable, they declined to be specific about quarterly trajectory and directed investors to a year-on-year view.
• Cost discipline: Operating discipline and sustained cost discipline were cited alongside product mix as drivers of the profitability improvement.

Rajiv Gandhi: "I think at the you can say that on a year-on-year basis, we will be doing better on a quarter-to-quarter basis such trajectory should not be measured."

Product & Capacity Updates

• H9N2 Avian Influenza vaccine: Received both marketing and manufacturing licenses post quarter end, strengthening the Poultry Vaccine portfolio for domestic and export opportunities. An Integrated Avian Influenza Management approach was introduced alongside the launch, including vaccination, probiotics, and farm hygiene solutions.
• Fill/finish facility: Capitalized and effectively doubled drug product capacity. Remaining CWIP expected to be capitalized over coming months. The facility will cater to existing products and more export markets, but management declined to disclose any specific contract manufacturing or innovator-led manufacturing discussions.
• BSL-3 facility repurposing: Originally created for COVID vaccine drug substance, now being evaluated for conversion into an animal vaccine facility. Management has yet to pin down exactly what will be done.
• Poultry pipeline: Continuing to evaluate additional poultry pathogens and combinations across Newcastle disease, Bursal disease, Marek's disease, and recombinant Avian Influenza platforms, prioritizing only where regulatory clarity, manufacturing scalability, and commercial viability align.
• Petcare: Exploring pet vaccine opportunities for India and Africa using existing facilities without incremental capex, and evaluating potential licensing opportunities. Management wants to increase share substantially but gave no timeline.

Priya Gandhi: "All we can tell is it's a very, very important disease and it is a cause of a lot of challenges in Poultry. And it is an upcoming market. It's just recently got licensed here in India."

Government Tender Exposure

• The drag this quarter: Delays in government-led immunization programs, specifically the National PPR Immunization Program and Goat Pox Program, were the primary reason for the Animal Health decline. Execution is now expected to commence from February 2026, with improved momentum anticipated in Q4.
• Strategic de-risking: Reducing dependence on tender-driven revenues is an explicit strategic priority. The ongoing process involves increasing reach directly to dairy farms in India and aiming to supply directly without tender business in exports. Management wants to reduce stress on tender business over the long period.

Export & International Strategy

• Africa: Structured execution now prioritizes working capital discipline and selective geographic exposure, a shift from earlier opportunity-led participation. Products registered in neighboring countries are intended to widen the addressable market.
• Export manufacturing stance: When asked whether the new fill/finish facility could support contract manufacturing or innovator-led manufacturing for export markets, management declined, stating they want to retain the Hester brand and will only export under it.

Priya Gandhi: "No, none of that at the moment. We want to retain our brand, and we will be – Hester will only be exporting this."

Guidance & Commitments

Key Metrics