with capacity addition already done, looks like company has set itself up for more revenue and more profits during next 3/4 years. Difficult to say it will grow 20 or 30% but trajectory is up and company has built up capacity to capture huge opportunity as and when it arises in terms of tenders.
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Hi Guys ,
As per the PPR Eradication Policy report published by FAO (Vaccine Business in PPR Eradication program in Africa is expected through tenders likely floated by FAO) below are few stats for period 2017-2022:
ā¢ Total Budget allocated towards PPR Eradication Program over period of 5 years: USD 996.4 MN approx. which would be spread across 4 components.
ā¢ Component 3 (Vaccination and other measures, Demonstration of freedom from PPR & Control of other small ruminant diseases in support of PPR eradication)- USD 884 MN would be deployed towards this comp (5 years)
ā¢ Procurement of Vaccines spread across 5 years:
ļ¼ Year 2 & 3 (Procuring 1.3 Bn doses of vaccine @ USD 10 Cents) translating to USD 130 Mn
ļ¼ Year 4 (Procuring 200 Million doses of PPR Vaccine @ USD 10 cents) translating to (USD 20 Mn)
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thanks for sharing.
if possible, can you describe possible opportuniity quantitatively and likely % pie which Hester can have from this.
From Business Standard - http://www.business-standard.com/content/b2b-pharma/hester-biosciences-to-set-up-animal-vaccines-facility-in-tanzania-117061200270_1.html
Hester Biosciences Ltd will build a manufacturing facility in Tanzania for manufacturing animal vaccines and health products to cater to entire African continent.
Though the project size is yet to be finalised, the company has decided to invest $ 3 million, by way of equity, in its wholly-owned subsidiary company - Hester Biosciences Africa Ltd. While the company will raise $ 3 million through internal accruals of Hester India, the balance amount for the project would be raised through debt.
From ET:
Can you tell us a little bit more about the $3 million investment being made in Africa?
Africa, according us has a good potential for various animal diseases besides the other diseases which are common across the globe. There are Africa specific diseases which have not been addressed to and also there are no major plants in Africa that produce animal vaccines. There are few government plants and less than five private plants, so we think that having a plant in the continent addressing specific African issues would give us a lot of mileage.
How will the investment be done and how do you plan to fund this investment?
We are still trying to fix up the project size which means the whole planning would take around a month, month and a half time. The equity that we hope to do is for US$3 million and it would be financed directly from our internal accruals Hester India. And this equity would be 100% ours, we are not expecting to take anybody as an investor along with us in this plant in Africa.
Now as you plan to manufacture animal vaccines and heath products in Tanzania do you think that the product will attract high margins more than 80% of required vaccines are currently imported into Africa?
The vaccines and health products that are being sold in the continent are at much higher prices than what they are sold internationally, so yes we would be able to have a higher realisation but our bigger strategy is to make the vaccines and health products available at international prices penetrate the markets. Rather than addressing a small market with a bigger margin we want to address a bigger market with the normal margins. With a normal international pricing thereby it even benefits the end user and we are at a level playing field as much as what we are in other countries.
When do you expect this investment to break even and start contributing to earnings?
As I said we are still planning. We are yet to even decide the exact project size which should happen in a couple of months.Once we start the planning and embark on the project, it would take approximately around 24-30 months to start the commercial production and we presume that the break should be in the second year of production.
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If hester bio sales depends on governmentās tender then how hester bio will earn margin in near future from the domestic market and from African market??
The govt tender business is a lower margin (compared to direct sales) higher volume business.
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Thank you ā¦but then how hester bio will increase their margin as they saying in recent interviews that in africa there is tender based businessā¦this will effect the bottom line but boost the top line. How one should take call on this kind of business??
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The article states āHester Biosciences is one such player which finds itself on winning turf
with the growing clamour for steps to ensure better health of cattle
and the need to increase milk yieldsā and ends stating āwith cows set to occupy centrestage in the country in the forseeable future, it is not surprising that he is already mulling creating a
division dealing exclusively with scientific management of cows
specialising in prevention and curative diagnostics.ā That made me wonder, if current over attention to cow protection will help the cause of cattle farmers, thus improve the fortunes of companies like Hester or will it reduce cow rearing further. Especially, when I visit articles like
I do see the cow protection belt has less cows compared to other states. (See the charts in article.) Now, if the argument was cow protection will lead to increased sale of Chicken, thus will help Hester, I would have more convinced. I would think more farmers will leave cattle rearing as it will turn less profitable and since the non-veg food habits may not change, it will increase chicken consumption and reduce milk production and cattle rearing (be it buffalo or cow).
Views invited.
Disc: No investment. Only tracking
Whats the update on facility in Tanzania - for the PPR vaccine in Africa - Yes, its imported in Africa and as of now we are exporting it from our Nepal plant. As of now we have shown an intent to set up the facility and look to invest $3mln and we will able to give more details in next 2-3 months. Size of the project would be about $10 mln.
Exports - as of now its 10%ā¦our focus is on increasing this due to PPR and our focus is on developing the distribution network to enable us to push other vaccines and health products. Exports should grow sizably and aim to grow this at 100%
Overall we target to grow at 20-25% for this year and large animal segment to grow at 50%
We are looking to launch our animal diagnostic segment in a month or so. It wonāt be large in near term but it complements our products. In this year this may not grow beyond 40-50 lac. In 2-3 years it could give us $2mln revenue by 2020.
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My notes from Hester Biosciences AGM Hester notes
- Focussing on back yard poultry. It means small farmers which have 7 - 8 chicks and 1-2 sheeps. Targeting Orissa, Jharkhand and Chattis gadh for this. Potential - 6 to 8 million chicks.
- Bill Gates NGO is helping to set up distribution.
- GST effect - prices drop by 20%.
- Greenfield project to be planned in Tanzania. May have to raise debt for this(Didnāt disclose how much)
- Profitability is higher in diagnostic kit but market size is vey low.
- Looking at Europe market for diagnostic kit(not sure whether for importing or exporting)
- Brucella has lot of potential. Indian govt is also looking to eradicate this.
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Regarding the Nepal Plant, the Chairman has initially said that the total Capex would be INR 36 Cr. But now it looks like it has gone up to INR 50 Cr. Any idea why the costs went up.
The Chairman has said that the revenue from the Nepal Plant at full capacity would be 50 Crores. If the capex goes up, the expected FAT ratio would go down from 1.38 to 1.0.
Also any idea what is the capacity utilization achieved for the inactivated vaccines. What is the expected capacity of this segment?
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Very good result. Especially large animal vaccine. Nepal plant perfo disappointing. Internal quality issues sighted as a reason. 1b0ee62c-3577-4ce6-abef-f8fdd06377b5.pdf (649.6 KB)
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Stellar results from Hester , in spite of muted performance by Nepal Plant.
Q2 Highlights
ā¢ Net Sales for Q2FY18 is recorded at INR 384.79 Million as compared to INR 301.71 Million for the
previous corresponding period, thereby registering a growth of 27.53%.
ā¢ Net Profit for Q2FY18 is recorded at INR 88.55 Million as compared to INR 59.89 Million for the
previous corresponding period, thereby registering a growth of 47.85%.
ā¢ Earnings Per Share for the Q2FY18 stands at INR 10.41 as compared to INR 7.04 for Q2FY17.
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Q2 Concall Highlights: (source: icicidirect)
- Large animal vaccines grew 174% YoY to 8.5 crore mainly due to robust sales in two vaccines in India- Bruscella Abortus (anti-bacterial for bovine) and PPR vaccine (anti-viral for sheep and goats)
- Poultry vaccines revenue grew 12% YoY to 29.6 crore
- As per the management, large animal vaccines command higher margins than poultry vaccines
- The company saw subdued pickup in PPR tender in Africa and thereby, Nepal division achieved a turnover of 13 million, below managementās expectations. However, with the start of PPR tender, the management expects a 180- degree turnaround in Nepal revenues
- On its thermostable Newcastle poultry sales, the company partnered at rural level to facilitate mass vaccination for the backyard poultry, cattle, sheep and goat population. The immunization initiative covers 3 states: Orissa, Chhattisgarh and Jharkhand with the help of GALVmed, a Scottish NGO
- Government of India has embarked on a plan to eradicate Brucella and PPR and currently 10-12 states are involved in it.
- Currently in India only two companies are competing for Brucella vaccine tender and three companies for PPR vaccine. The tender size is expected to increase with greater awareness
- There was no GST impact on the vaccines business
- The management communicated that the market size of Middle East is small. However, Saudi market is huge and the company is in the process of getting its first product registration in the country
- The company has its products registered in Egypt, Malawi, Vietnam, Myanmar, Nigeria and Ethiopia
- Additional plant capacity will commence from December 2017 onwards which will augment the capacity of inactive vaccine by ~30%
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Recent interviews:
Our focus continues to be large animal division. We have been getting good orders for PPR. Tenders coming from various states all over the country. That will be the growth driver.
By the end of FY19, we hope to have a contribution of atleast 25-30% from large animal vaccine segment.
Nepal - plant functioning has stabilized. The issue is that the plant has been setup to supply PPR globally wherein FAO has been thereā¦but the pace is slower than what we expected. We feel that in the last qtr of this financial year or Q1FY19 it should pick up but as of now its slow. International orders are coming but they are small as of now.
Can we expect 30-35% growth in FY19 - Yes, we should do 30%
The domestic tender business is doing pretty well and hence we had to forgo some international business. We are expanding capacity and it should happen in January 2019.
We expect EBIDTA growth at 36-39%
Margins in diagnostics divisions are even better, but as of now its too small to make an impact.
Hester plans to raise capital to fund setting up of manufacturing unit in Africa at a cost of 100 Cr.
āWe will retain our sales and net profit growth margins FY18, but the growth in coming year is expected to be much higher based on the rollout of procurement tenders from various state government and Food and Agriculture Organization (FAO), the UN body that leads international efforts to defeat hunger,ā Gandhi said.
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Hesterās Q3 Highlights
- Hester has reported a Net Sales of INR 319.25 Mn in Q3FY18 as compared to INR 290.94 Mn for
the previous corresponding period, thereby registering a growth of 10%. - Net Profit for Q3FY18 is recorded at INR 65.01 Mn as against INR 58.21 Mn for the previous
corresponding period, thereby registering a growth of 12%. - Earnings Per Share for the Q3FY18 is at INR 7.64 as against INR 6.84 for Q3FY17.
Nine Months Highlights - Hester has reported a Net Sales of INR 977.69 Mn in Nine months ended FY18 as compared to
INR 899.83 Mn for the previous corresponding period, thereby registering a growth of 9%. - Net Profit for Nine months ended FY18 is recorded at INR 215.44 Mn against INR 178.29 Mn for
the previous corresponding period, thereby registering a growth of 21%. - Earnings Per Share for Nine months ended FY18 is at INR 25.33 as against INR 20.96 for the
Nine months ended FY17.
Business Overview
ļ· The sales in the Poultry divisions grew at 9.28% while in the Large Animal divisions it grew at
22.05% in Q3FY18.
ļ· Domestic sales grew by 10.49% while exports grew by 17.62% in Q3FY18. Exports have grown
marginally, lesser than budgeted. By the end of the year, we hope to see an increase in exports as
we have rationalised as well as increased our production capacities to ensure a proper flow of
products for exports, besides additional registrations having been received from a few African
countries.
ļ· Nepal plant registered a turnover of INR 3.7 million for Q3FY18 and INR 9.90 million for nine
months FY18. There is a net loss of INR 50.60 million for nine months FY18. Having received
market authorisations just this month for selling in Nepal, the sales are forecasted to grow.
Standardisation of most of the products has been completed. International tenders for PPR
vaccine procurrement are yet to pick up, which is the main cause for the lower sales.
ļ· Hesterās wholly owned subsidiary Hester Biosciences Africa Limited has completed the market
survey. The prospects to set up an animal vaccine manufacturing unit in Tanzania seems to be
emerging.
Summary:
- Operation of Hester India having grown by 10%, we have addressed all capacity related issues to
ensure a higher growth. Geographical territories within India have been added in the large animal
divisions. Domestice tender business in Q4 would also lead the sales in the large animal vaccine
division. - Operations of Hester Nepal would pick up with the flow of international tenders.
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Average set of results:
https://www.bseindia.com/xml-data/corpfiling/AttachLive/cf424cd7-6672-4581-b02f-be15ed977984.pdf
Though the topline hasnāt increased much but good to see continued improvement in bottom line. The stock looks very expensive on valuations but few interesting things:
- Dividend doubled to Rs 10 per share vs Rs 5.3 per share last year.
- Co has finalized the details of Africa venture and its a big capex of about 120-125 Cr and they would be getting grant of about 25 Cr+ from Bill Gates foundation and close to 80 Cr as loan from Bill Gates foundation. This should make the project very attractive.
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