9MFY20 has been below expectations in terms of achieving our financial objectives.
Though the Indian poultry industry has come out of the crisis due to earlier high prices of maize,
the recovery has been slow, thereby continuing to push the sales down of our poultry healthcare
division. We hope to see a major boost in sales in the Poultry Healthcare Division.
In the Animal healthcare division, while the trade business grew by 29% in 9M and 43% in Q3,
purchases by various state governments have got delayed. We are confident of having good sales
through tenders supplies in the Animal Healthcare Division in Q4.
Even with lower sales, we continued to strengthen our marketing team, thereby adding further to our personnel costs. The results of which will be seen in the coming quarters. In the next financial year, we hope to see an upward spiral growth in sales with this bigger team. 4. To address the market conditions, we temporarily changed the product mix. Sales were derived from fast moving products rather than high margin products. This impacted our gross margin. We have already started rolling back to a more profitable product mix with our original forecasts. This would be evident in the coming quarters.
Due to the current market conditions, we have extended our credit cycle which has temporarily
impacted our finance cost. We hope to restore the credit cycles by the financial year end.
Is it a good strategy to first distribute huge dividend (returning equity holders’ money) every year even when Hester has debt on books and has high requirement of working capital (3 moths of inventory and 3 months of receivables)?
Also they are doing huge capex of 125crs. for which now they are raising funds via diluting equity
I was confused with the company since last 4 5 days as i read more about company, it sometimes gives u confident that it will turn as MNC in upcoming years…
And when u check mr.rajiv gandhis delivery it really dispoints u like he said 1000cr topline on 2020 which is merely at 200cr. Eventhough company becomes 1000cr.
Their 50% revenue comes from tenders which is big RED FLAG for me.and still its poultry vaccine mfg.
Bill gates recognition is big positive, took it to another edge…
I take todays announcement as imature behaviour of the managment .
It reflects its purely operator driven stock.
Management is good at creating positive centiment for the company without delivering much.
Some of the companies are good to create price speculation by releasing some news related COVID-19 treating medicine or vaccine. US stock market was rallied by 400 points due to news from Gilead Sciences, Inc. that they are having effective medicine to treat COVID-19 but now failed to support the claim !!
This inclusion of a para on Covid-19 raises a red flag. Does not speak high of management integrity. NO good management says like this without doing even a scratch of work. And today price is up by 20%. Collusion not ruled out possible. Management action is very important in a good company.
The management has a history of over promising and under delivering. If one goes through this thread you will find evidence for that in multiple places. Having said that, this one looks more like attention seeking. I really don’t know how similar would be the business and operational dynamics to make human vaccine as compared to animal vaccine.
Disclosure: Invested since 2015, no trades in the last 3 years
Thanks
People have stopped eating meat due to virus fear and I recall reading news on business standard that farmers are culling chicken to save on feed
I don’t know how much of this will have an effect of Hester
Disclosurer:Tracking but don’t own
I believe they are more in tender business and not in the direct sale which might be a small proportion of overall business. Q4 should be good. Q1 might be tricky… I see nothing wrong in collaborating in a business that globally is being recognized as the biggest risk in sustaining human life. It might not give them an immediate return but a potential stream of business.
Apparently, Hester is not the only animal vaccine company doing this. Indian Immunologicals Ltd (unlisted) has partnered with Griffith University in developing a single-dose vaccine.
Update : IIT Guwahati working with Hester Biosciences to develop vaccine
The vaccine will be based on recombinant avian paramyxovirus-based vector platform and should be ready for animal trials by the end of this year, IIT-G said in a statement. The development is still in its early stages and Hester’s involvement would be from master seed development up to release of the commercial vaccine.
So far, the average Brucella vaccine market in India was about Rs 8 crore a year and this will catapult by twelve to fifteen times annually. The central government has already tendered 4.13 crore doses valuing approximately Rs 100 crore worth Brucella vaccines for the period up to September 2021," says Rajiv Gandhi, CEO and Managing Director of Ahmedabad-based Hester Biosciences.
While I am analysing anual report with my limited knowledge I found a query.
The remuneration of managing director is very high it is almost touch its upper ceiling.please give comment about this query.!
The business here is not a proper B2C business, most of the offtake is from institutions like government agencies, NGOs etc. And procurement by these institutions is always through tenders.
So a large chunk of Hester’s business is tender based. You can go through concalls wherein they keep talking about tenders.
Q1FY21 was impacted due to the pandemic situation. Most of the period in this quarter had a direct impact due to the lockdown.
Sales progressed with an upward trend in May and June and the trend seems to be now continuing.
Gross margins were impacted due to the changed product mix. Low value necessary products and vaccines were sold more rather than high value products.
Expenses saw a downward trend. With the new philosophy of working, as well as reorganising our sales team during Q1, we have reasons to believe that percentage expenses will continue to reduce.
Export targets were met with our sales being registered mainly in the month of June.
The trend seems very positive for domestic and international sales with the beginning of Q2.
Various internal steps taken in Q1 would also show impact in the coming quarters:
Focus has been put on health products. Health products have a bigger market than vaccines. This will surely improve the top line.
Though in Q1 we were compelled to sell low value products, a shift has been made towards rationalising the product mix to optimise growth and improve profitability.
The Government of India’s National Animal Disease Control Program for Brucella is expected to be implemented within a few months (which was supposed to have been implemented from Feb 2020). Hester is one of the two suppliers for the Brucella vaccine.
