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  • 18 May 2023
  • ICICI Securities

HESTER BIO SHIFT TOWARDS ANIMAL HEALTHCARE CONTINUES TO IMPACT MARGINS

HESTERBIO - 1819 Change: 16.40 (0.91 %)

News: Hester Bio delivered 19.2% YoY growth at ~Rs 67 crore. Such a performance was driven by strong performance from the Animal healthcare segment, which saw 29.4% YoY growth which came at ~ Rs 21.7 crore. Poultry segment showed a down trend of 7.5% at ~ Rs 36.7 crore during the quarter. Gross profit margins came in at ~70% in Q4FY23 down 295bps largely due to change in the product mix between vaccines and health products whose sales were up during the period. On the operational front, EBITDA was at ~ Rs 12 crore, up 13.2% YoY whereas margins came at 17.4% which took a hit of 92 bps YoY. Lower margins were a result of higher market development costs in animal health division and the new pet division. Adjusted net profit for the company was at Rs 5.8 crore, impacted 25.1% YoY.

Views: The growing need for Goat pox vaccine to stop outbreak of lumpy skin disease (LSD) in cattle drove the animal healthcare segment. Poor collection cycles and much fewer new bird placements are the results of high feed costs and low product realisations which affected the Poultry segment revenues. However, the de-growth of vaccine sales was partly offset by the continued growth of the poultry health products sales. Going ahead, Hester is expected to focus on vaccine tailwinds on the back of LSD outbreak and PPR tender while improving sales productivity and scaling-up health products, which remains key for better operating leverage. As Hester Bio strengthens its hold in the animal healthcare space, order flow and pricing power is likely to improve in the near future.

Impact: Negative