Hester Biosciences Limited.xlsx (79.4 KB)
Given that you are new to investing, very good effort by you.
My thoughts on some of your queries:
- If we look at the history of the co, the co has often been late in achieving its ambitious targets. Probably its due to the high regulatory process the industry has to face. So we have to be a bit conservative in forward projections.
The high regulatory process, research etc is a big entry barrier.
Trading sales could be following - 1. They have been distributors for several MNC vaccines 2. Animal health segment. Yes, export has a huge potential.
Though they have done several acquisitions and some have not worked out but the good part is that the amounts invested were quite small.
30 June 2015
Fire at Hester’s Mehsana Plant
There was a fire in one of the secondary production buildings at Hester’s Mehsana
plant at 5pm on Monday 29 June 2015. The fire was completely brought under
control by 7pm.
The probable cause could have been electrical short circuit, though we have yet to
ascertain the same.
There has been no loss or damage to any life.
We are assessing the asset and raw material loss, which are covered under
There will not be any major impact on sales due to the temporary loss of production.
Investors having a desire to visit the plant to assess, are welcome on Friday 3 July
2015 for a 15-minute visit. Please inform at [email protected] by Thursday 2 July
to enable logistics planning.
The Hyderabad-based Indian Immunologicals Limited (IIL) is planning to venture into animal formulations and is targeting to reach an overall turnover of Rs. 500 crore by the end of financial year 2015-16.
According to Ashok Kumar, deputy director of IIL, being a semi-government company, IIL has designed its mission and vision to make biotechnology affordable and accessible to all. “IIL is a subsidiary of National Dairy Development Board and our initial goal was to eradicate foot and mouth (FMD) disease in India through prevention. As mandated by the government of India, we produced FMD vaccine for cows and buffaloes and helped the nation in achieving ‘white revolution’ through excess production of milk. To sustain the future growth, slowly IIL is venturing into human vaccine manufacturing and animal formulations. We have enhanced our vaccine manufacturing capacity from the initial 25 million doses in 1989 to 360 million doses today,” said Kumar in an exclusive interview with Pharmabiz.
For its expansion for animal health formulation unit at Karkapatla at Biotech Park in Medak district, IIL is planning to invest Rs. 280 crore, which is expected to start manufacture by end of this year. “Apart from expanding our animal health formulation unit at Karkapatla, we are also investing Rs. 150 crore for pentavalent vaccine manufacture,” informed Kumar.
In fact, IIL has not just excelled in the development of veterinary and human vaccines for foot-and-mouth disease, rabies, bacterial vaccines, canine vaccines, hepatitis, measles, MMR and DPT, the company’s efforts are also in tune with the national goal of making vaccines affordable and accessible to everyone in the country.
Established in the year 1982, IIL was purely an animal vaccine manufacture company and has achieved many heights since then. Today IIL is the largest supplier of foot-and-mouth disease vaccine in the world. The company has not just limited itself to vaccines, but has also ventured into formulations business. “As already we are exhibiting monopoly in animal vaccine from the year 1999. Our efforts in bringing a safe rabies vaccine for canine succeeded and reckoned us good name. Looking at our achievement, government requested IIL to develop a safer rabies vaccine for humans and we could successfully accomplish that goal by delivering the most popular Abhay Rab,” informed the deputy director highlighting major achievements of IIL.
Among its new ventures in R&D, IIL is working on to launch world’s first vaccine for prevention of ‘Poreside’ disease caused by tapeworm.
Hi All, did anybody attain Hester concall today? what were key messages?
Caveat Emptor : Hester is changing its sales guidance very frequently and very sharply.
In FY 2013 annual report, management shared vision of 1000 cr. sales by FY 2020. Refer page 7 at below link.
In one of the BSE disclosure, management gave guidance of Rs. 200 cr. sales by FY 2017. Refer page 2 at below link
In FY 2015 annual report, management gives guidance of 25% growth in sales over next two years. Refer page 25 of below link.
FY 2013, FY 2014, FY 2015 and Q1 FY2016 sales are 65 cr., 69 cr., Rs. 90 cr. and Rs. 24.5 cr. respectively.
Did the Nepal plant go steam as expected in Sep 2015 ?. I couldn’t find any updates on this.
The plan now is to get the plant started in January 2016. It has been delayed due to the earthquake in Nepal.
Can someone tracking this provide insights as to why the Nepal plant has been such a drag? The first post on this thread way back in Dec 2012 mentions that it was expected to be ready by Feb 2013, and we have now seen three years go by and its still not up? Is this because of pending client contracts? regulatory approvals? government clearance? The annual report and stock market filings do not give out much except for the Nepal earthquake which happened in early 2015.
While I don’t have a concrete answer, what I have understood with respect to the delay is:
- Promoter exuberance. Rajiv Gandhi has in the past offered tall claims that do practically take longer to pan out. Timelines are not his strongest point
- In the initial period there had been delays in getting approvals with respect to layouts and design that took sometime to be resolved.
- As you mentioned the earthquake slowed down work earlier this year
- In the last conference call he specifically mentioned the social trouble, in particular the border blockade being another reason for the delay.
There could be others which I am not aware of.
While he sounded confident of running a test batch in December (on the con call) - Personally I think it may take a little longer than that.
Disc: Invested. >5% of my PF
I am not able to understand the moat here and doubt if there exists one.
- Animal vaccine has established players (IIL, Globion India, Indovax) most of whom are WHO-GMP.
- From their website “Hester Biosciences Limited is a WHO-GMP, ISO 9001:2008, ISO 14001:2004, OHSAS 18001:2007 & GLP certified company, manufacturing animal vaccines and health products”. Most of these certifications do not appear to be exploitable moats. Any established player should be able to get these certifications.
- I am unable to find goverment regulations/permits that can give
advantage to particular vaccine maker. Drug related concerns seems to be with the veterinarians/farmers (such as ensuring Maximum Residue Limits, contaminations, etc.,) and not much with the drug maker.
Please let me know if I am missing anything?
Hi. Adding my two penny bit again
I don’t think one can look at certifications and approvals as a moat. These are requirements as part of a bidding or regulatory process which most companies in the sector will have or need to get in order to compete and sell effectively.
Think of it this way – Pharma companies wanting to sell in the US market need to have in place USFDA approvals, this does not mean that they have a moat, or that these approvals can act as a moat.
‘Moats’ in my much uninformed opinion is a term that is being over used today – it is important yes, but more so in a commoditized sector/ industry, think Kitex/ ACM?
In this particular business the investment rationale/ decision has to be based more on the size of opportunity, the positioning of the company in relation to the opportunity and how management is looking exploit the opportunity in the years ahead; in terms of launching new products, looking to drive scale in manufacturing and distribution, entry into new markets and marketing efforts (of which these approvals are a part) etc.
Whether or not current price reflects value is something I reserve my opinion on.
Agree moat is becoming a abused word today, but at the current valuation I need to understand if it is worth the price and how well they are placed in the industry and moats if any exists. I believe approvals from regulatory bodies are important and cannot be undermined in the line of business in which Hester is. Perhaps it may not matter much when seen in isolation, but a combination of these (variety of approvals, trust and relationship with customers/vendors, patents, manufacturing capacity, etc.,) might result in a moat.
Disc: Tracking position, recently invested.
Hesters Q3 Results and con call updates:
Con Call highlights:
- Poultry business was slow due to strife in the market - however things are picking up._ “The trend in the 4th quarter is extremely promising, we can already see that from the last few days in December and definitely we are headed towards a good turnaround.”_
- launched two poultry vaccines namely Salmonella and Inclusion Body Hepatitis Vaccines
- Control 35% of the poultry vaccine market in India
- SALES BREAKUP: Under Poultry Vaccine division, sales were Rs.20.10 crores for Q3, while it was Rs.61.59 crores for the nine months. Under Poultry Health Products division, it was Rs.1.24 crores for the Q3 and Rs.3.88 crores for the nine months.
Large Animal Health:
- There are four Cattle Vaccines which are in the pipeline to be launched depending upon the regulatory issues, the inspection and other formalities that be should be completed in 2-6 months. In terms of the potential of sales –_ “think for us to give a better idea on the exact market potential for these Vaccines it could take approximately around 6-months to a year’s time by the time the government programs are well in place”_
- Total size of the cattle vaccine market is estimated at 300-400cr (India)
- SALES BREAKUP: Under Large Animal Vaccine it was Rs.0.02 crores while it was Rs.0.06 crores for the nine months. Under Large Animal Health products, it was Rs.1.99 crores while it was Rs.5.38 crores for the nine months
- With slow demand this quarter (poultry products) the company preferred not to sell on credit as it states managing inventory is easier than chasing receivables – prudent, though you may lose market share to competitors, which they stated could be a possibility. However Rajiv Gandhi stated that there was definite uptick in demand Dec onwards.
- Nepal two trial batches have been run for East African markets however going forward Nepal production will be impacted by the socio-economic stresses of the moment.
- The focus of the company is going to be on the PPR and the Brucella Vaccine. For which the company has got the license for the PPR Vaccine. They have participated in quite a few tenders in a few states, and result should come out in this quarter. Company is hoping that this will cover for growth that was expected for the past few quarters.
*Company stated that its endeavor is to get the maximum out of the assets already created rather than focus on creating even more capacity…
- EXPORTS FUTURE GROWTH: Company wants to grow exports 100% year on year for the next few years.
My personal Opinion:
- Topline has been muted though margin expansion has been good. I don’t think there was a clear answer as to why there was slow growth in the Poultry vaccine market – though he did point towards something to do with auspicious months that come together once in 15 years? Seemed a little forced…
- Mr. Gandhi like a lot of 1st gen entrepreneurs is the eternal optimist – and we need to be more realistic when listening to his guidance/ timelines
- PPR can be a game changer in terms of a revenue driver. Not just in India but worldwide as FAO looks to spend US$7 billion in eradicating this disease worldwide – though this will be spread over the next 2 decades (according to my reading).
- Nepal production facility ensures that Hester is the only supplier of both the Indian and Nigerian strain of the PPR vaccine (In India you can only sell vaccine made from the Indian strain whereas world over the Nigerian strain is used)
- Large animal health can be a growth driver though off a very small base – it’s just 10% of the poultry business.
- The company is focusing on exports in equal measure and is looking towards Africa as a key market over the coming years – Rajiv Gandhi also mentioned his openness towards acquisitions and/or setting up of a greenfield project in this region to localize production.
- All in all, Hester is saying the right things and appears to be moving in the right direction – however approvals and execution are going to be critical. In addition, the Nepal situation needs to ease of before the company can really capitalize on its facilities there which are important for its export market.
Thanks for the concall details.Hester has corrected a lot during the recent fall.I see this as a good opportunity to start nibbling from these levels. Only thing I wonder is what is the realistic time frame for the Nepal operations to start adding to the top line…
News piece on Hester and GALVmed partnership in Jharkhand.
I don’t think this will have a material impact on topline in the short/medium term at least - but interesting to observe the ways in which the company is looking to expand its presence/ foothold.
As a fellow investor told me - _‘what I like is yeh log kuch na kuch effort marte rehta hain’
Finally some good news on Nepal. Hope things slowly move back to normalcy.
The main ethnic group that’s been protesting for months over Nepal’s new constitution is ending its border blockade and general strike, bringing relief to the Himalayan nation severely short of fuel, medicine and other supplies.
Considering that major sales of Hester biosciences are still related to poultry, the following news article might potentially be significant.
Has promoter increased stack recently? Any one has news? I think it was 40% earlier and now 54%. But not sure.