Hester Biosciences sees 40% fall in PAT on lower demand for goat pox vaccine

Animal healthcare company Hester Biosciences’ quarterly revenues and profits declined on a year-on-year basis due to a sharp fall in its revenue from animal healthcare.

Hester’s total standalone revenues for Q3 FY24 decreased by 7% to Rs 655.05 crore compared to Rs 707.73 crore in the year-ago period, mainly due to an 18% decline in revenues from its animal healthcare division to Rs 301.50 crore.

The decline was primarily attributed to lower sales of goat pox vaccines following moderation in demand after initial surge to protect cattle from lumpy skin disease outbreak. Discontinuation of two animal health products – CurX Injection and iSumovet – in view regulatory changes also impacted division’s sales.

In contrast, Hester’s poultry healthcare division posted healthy 8% revenue growth in the quarter at Rs 348.82 crore, aided by pick up in poultry vaccine industry and strong 34% growth in health products. The petcare division revenues declined 22% due to overall slowdown in pet adoption rates post-COVID, but remains a focus area for future.

For the nine month period, Hester reported 10% revenue growth at Rs 2,122.83 crore compared to Rs 1,933.04 crore last year, as both animal and poultry healthcare divisions improved sales over the period.

On the profitability front, Hester’s gross margins declined to 67% in Q3 FY24 from 70% last year due lower contribution from high margin goat pox vaccines. This resulted in 36% Y-o-Y decline in EBITDA to Rs 115.68 crore and 40% lower net profit of Rs 64.75 crore compared to Rs 107.29 crore in Q3 FY23. For the nine months, EBITDA was down 13% while net profit declined 24%.

On the consolidated basis, including subsidiaries in Nepal and Tanzania, Hester’s total revenues declined 11% Y-o-Y to Rs 669.83 crore in Q3 FY24 and grew 13% to Rs 2,252.91 crore in 9M FY24. The company reported consolidated net loss of Rs 40.20 crore in Q3 due to continued struggles at African arm, compared to net profit of Rs 121.58 crore last year.

In the earnings release, Hester outlined several steps being taken to improve performance going forward. These include push for health products across divisions, upgrading key vaccines leveraging recovery in poultry industry, strategic expansion in pet care segment, boosting exports from Tanzania subsidiary and enhancing domestic business in Nepal unit.

The company stated that indicators point towards upward trajectory in sales and profits over next few quarters, as it focuses on deriving balanced revenues across divisions to minimize impact from segment specific downturns. However, African subsidiary is expected to face near term struggles before witnessing revenuw growth from Tanzanian market and exports.

Hester Biosciences is one of leading animal healthcare companies in India engaged in manufacturing vaccines and health products for poultry, cattle and pets. Its key vaccines include world’s largest PPR vaccine portfolio and second largest poultry vaccine supplier in domestic market.

The company’s growth outlook remains positive, but near term prospects appear muted due to sectorial issues and subsidiary troubles.