| Q2/H1 FY26 Earnings Conference Call
Summary : Hester Biosciences experienced mixed H1 FY26 results with declining sales but improved consolidated profitability, driven by strategic initiatives and new vaccine launches despite government program delays and regional challenges.
Management Perspective positive : "We expect this to be fully capitalized by March, post which the plant will start contributing meaningfully to our future growth.""We remain confident that the groundwork laid over the past two quarters will begin to reflect in stronger performance in the second half of this financial year.""Hester continues to be driven by science, sustainability and purpose, strengthening animal health while building lasting value across markets.""We are here to grow and fulfil all the commitments that we make to all of you."
Concall Report Analysis & Insights
Business Overview
- Q2/H1 FY26 standalone sales declined 12-13% and EBITDA/NPAT fell 13-15%.
- Poultry Healthcare division grew 18% in Q2 and 10% in H1, driven by vaccine demand.
- Animal Healthcare division saw a 50% degrowth in Q2 due to delayed government immunization programs.
- International consolidated sales declined 7%, but net profit increased 99% due to favorable forex.
- Hester Nepal reported a net loss in Q2 due to institutional order timing and disturbances.
Future Growth Prospects
- INR182 crore India plant capex to be fully capitalized by March, driving future vaccine production.
- Market authorization received for H9N2 vaccine, opening export opportunities for avian influenza control.
- Avian influenza vaccine sales expected to begin by December post-manufacturing license receipt.
- Pet vaccines to be introduced in India and Africa using existing facilities, no major additional capex.
- Lumpy Skin Disease vaccine launch anticipated mid-next financial year, currently supplying Goat Pox.
Management Insights
- H1 FY26 was mixed, with weaker India performance but stronger consolidated profitability.
- Focus on protecting margins through process standardization, efficient manpower, and balanced product mix.
- Groundwork laid over past two quarters expected to reflect in stronger H2 FY26 performance.
- Strategic focus is to strengthen fundamentals and reduce reliance on tender-based revenues.
- Aim to deepen presence across commercial, private, and export markets with operational discipline.
Signs of Skepticism
- Management acknowledges current quarter was 'damp' but expresses confidence for H2 without specific drivers.
- Timeline for Pet vaccines is 'nascent stage' with no clear launch date provided.
- Recombinant vaccine development is progressing but 'meaningful outcomes' are midterm to long term.
Risk Factors
- India business experienced weaker performance in H1 FY26.
- Government-led immunization programs for PPR and Lumpy Skin Disease faced rollout delays.
- Overall environment in Africa remains uneven due to political and institutional order delays.
- Nepal operations impacted by timing of institutional orders and temporary disturbances.
- Dependency on tender-based revenues is a focus area for reduction.
Good To Know
- Company is the 100% supplier for Lumpy Skin Disease immunization via Goat Pox vaccine.
- Hester has taken the highest number of veterinary technologies from the Indian government.
- BSL-3 human vaccine facility permit received for repurposing to animal vaccine use.
- Debt repayment will happen as per schedule, with routine capex for existing plants.
- Company aims to minimize duplication of vaccine strains across different plants.
Key Drivers
- New India plant capitalization by March.
- H9N2 vaccine market authorization, exports.
- Pet vaccines launch using existing facilities.
- LSD vaccine launch mid-next financial year.
Key Analyst Discussions
Competitive Environment
- Analysts asked about Hester's positioning against other vaccine manufacturers like Bharat Biotech.
- Questions were raised on leveraging distribution networks for animal health and poultry vaccines.
Market Trends & Consumer Behavior
- Analysts questioned the lack of growth in poultry vaccine sales over the past five years.
- Inquiries were made about the company's strategy for future disease outbreaks in poultry.
- Questions on the Lumpy Skin Disease vaccine launch and its market advantage were posed.
Financial Highlights
- Analysts inquired about the impact of INR182 crore capital work in progress on future growth.
- Questions were raised regarding the company's capex plans for the current and next fiscal years.
- Analysts asked about the company's debt repayment strategy given current cash generation.
- Queries on average vaccine price and capacity utilization across all three plants were made.
Product Composition
- Analysts asked how the company decides on allocating vaccine manufacturing across its plants.
- Questions were raised about the specific pet vaccines being developed (rabies, 9-in-1 canine).
Strategic Considerations
- Analysts asked about the repurposing of the BSL-3 human vaccine facility for animal use.
- Questions were raised about whether the new BSL-3 capacity is additional to existing capacity.