Hester Biosciences Limited — Investor Meet, 01-02-2025: Analysts/Institutional Investor Meet/Con. Call Updates

1. Financial Performance: Hester Biosciences has reported a subdued performance for the quarter and nine-months period ending 31 December 2024. Consolidated product sales for nine months grew by 2% year-over-year, while profit surged by 85% due to operational efficiencies and unrealized foreign exchange gains. However, Q3 witnessed a 6% decline in product sales, primarily attributed to a 24% drop in sales within the Animal Health System, alongside a 31% decline in profit after tax (PAT). Gross margins remained steady in Q3, while EBITDA saw a decline of 18%.

2. Future Outlook and Growth Drivers: Management remains committed to addressing recent challenges while focusing on long-term growth strategies, including expanding product offerings in poultry and pet care segments. They expect to introduce a new vaccine targeting Avian Influenza, coupled with ongoing immunization programs for PPR and Goat Pox.

3. Order Book and Operational Updates: The company has made progress in international markets, particularly in Africa, where it is actively participating in tenders. Hester Nepal has performed positively, maintaining a debt-free status, while losses in Hester Africa have halved compared to the previous year.

4. Analyst Q&A Insights (Detailed):

- Revenue and Profitability: Analysts raised concerns about Q3’s disappointing numbers. Management attributed the decline to challenging market conditions but expressed optimism about potential recovery in the following quarters.

- Market Position and Competitive Landscape: Analysts sought clarification on Hester's competitive edge, with management highlighting their unique full range of veterinary vaccines as a key differentiator.

- Operational Challenges or Risks: The discussion revealed concerns surrounding regulatory impacts, especially due to product recall. Management confirmed a proactive approach to comply with regulatory requirements.

- Capex and Capital Allocation: Management confirmed current capacities are adequate for growth without immediate expansion plans, maintaining a focus on efficiency and product mix improvement.

- Strategic Priorities and Long-Term Vision: Analysts inquired about strategic initiatives, with management emphasizing commitment to expanding offerings in both core and emerging segments.

5. Market or Regulatory Updates: The government’s initiatives in animal health have spurred tendering activities, indicating stability in demand.

6. Strategic Focus Areas: Management’s narrative reflected a focus on innovation within the poultry and pet healthcare divisions and a stabilization of operations in international markets.

7. Investor Insight: The mixed financial results suggest a cautious approach, considering both the potential for recovery and existing challenges. Observing the company's strategic direction alongside operational updates indicates a stance leaning towards a cautious 'hold' position, given the anticipated improvement in profitability and growth prospects in the coming quarters.