Poultry drives recovery but consolidated miss; profitability masking concerns

Consolidated -8.2% YoY (₹77.2 Cr vs ~₹84.1 Cr prior year); standalone +14% shows large geographic drag from international ops

Management referenced standalone gross margin improvement; consolidated OPM and NPM both 100%, but driven by exceptional Gates Foundation loan waiver (USD 7M gain), not operations

Stands as submitted; ~₹45-48 Cr prior quarter to ~₹60+ Cr now represents 25-33% sequential growth, 48% YoY consistent

Prior call guidance promised 'recovery starting in upcoming quarter'; Q1 shows continued delay 'pending PPR eradication, Lumpy Skin Disease programs'—expectation unmet this quarter

Standalone PAT growth 88% is plausible given margin expansion and poultry growth; consolidated 459.3% driven almost entirely by exceptional ₹7M+ gain from debt waiver, not operational performance

Prior calls referenced 'more balanced 50/50 revenue mix' goal; Poultry now 48% growth, outsized vs Animal Healthcare. Market penetration and new products (LPAI, feed supplements) not fully anticipated.

Prior call promised 'recovery starting in upcoming quarter'; Q1 shows 'continued to be impacted by timing of government-led immunization programs'. No material progress vs prior quarter's expectations.

Prior strategic narrative was 'strengthening core biologicals' + 'sustainable long-term growth'; consolidated -8.2% YoY (₹77.2 Cr) shows international drag (Nepal, Africa) larger than anticipated. Standalone +14% masks ~20% international headwind.

Gates Foundation reduced Hester Africa debt USD 12M to 5M, waived interest, made interest-free. Reflects 'geopolitical and operating challenges' in region—an admission of profitability issues without the waiver.

Too premature to comment; government must first clarify regulatory pathway (import vs. domestic manufacture). Monitoring developments but nothing to speculate on now.

Not within Hester's purview (between insurance, government, farmers). No industry impact seen; not even discussed in manufacturers' meetings.

Demand and strategy in Africa separate from operational discipline. We believe future is good, opportunities exist, working towards long-term strategy. Volatility will persist.

Combination: market penetration more aggressive, higher placement, bigger market share. NOT price-driven (prices only marginally up). New products (LPAI, feed supplements, disinfectants) contributing.

All challenges combined: new territory, virgin continent, struggling economies. 'Formative period' not gestation. Working on it, seeing positive results, will take off.

No directional guidance. Quarter-to-quarter work ongoing. Slowly happening, will happen in time.

Difficult to give a percentage. Facility is needed, regulated requirement soon for all orgs. Will be fully utilized for veterinary product pipeline.

Market response very good. Selling the vaccine. Has contributed towards some of the jumps in poultry division.

₹103 crores.

Till 2030.

Proud to serve dairy (PPR, Lumpy Skin Disease vaccines improve milk yield). Tender business inherently variable; over 1–3 year periods, steady. Also building direct farm demand. 'Not a single year without gaining one tender.'

Positive cash flow exists. Receivables slightly elevated due to seasonal issues; trend manageable, no concern, no red flag.

~60–65% utilization. Terms very subjective (different dose sizes: single to 2000 doses). Average ~65%.

Yes, includes entire manufacturing setup. Fungible between poultry vaccines and large animal vaccines.

Africa opportunities extremely positive (healthcare, veterinary). Nepal dependent on PPR eradication (world program). India doesn't yet recognize PPR, so using Nepal facility to serve global demand.

New emerging division, not reported separately yet. Products: antibiotics, anti-parasites, grooming. Part of animal health division currently. B2C and veterinary channel. Will report separately once scaled.

Going on proper timeline. Significant progress. Will announce publicly when appropriate.

Already selling. Manufactured in Africa, India, Nepal. Poultry market is huge in all three countries.

Management refused to provide directional guidance, citing long-term nature of R&D, regulatory, market development activities. Prior call guided 'recovery in Animal Healthcare starting next quarter'—unmet.

Consolidated 100% NPM distorted by ₹7M+ exceptional gain. Real operational margin significantly lower. No forward guidance given.

Animal Healthcare division ~40–50% of revenue, highly dependent on government PPR, LSD program cycles. Q1 miss shows delays recurring. Over 1–3 year horizons management claims 'steady business,' but quarter-to-quarter revenue swings material.

Hester Africa and Nepal operations are loss-making; Africa needed ₹7M+ debt waiver this quarter to appear profitable. Geopolitical and economic challenges cited. Long-term profitability timeline unspecified ('formative period'). No guidance on when breakeven expected.

₹96.7 Cr PAT and 100% NPM driven almost entirely by Gates Foundation debt waiver (₹7M+ gain). Without this, profitability deteriorates materially. Real operational margin unquantified by management; consolidated revenue also declining.

Prior call guided 'recovery in Animal Healthcare starting in upcoming quarter'; Q1 FY27 shows continued delays. No formal FY27 targets; management refuses near-term visibility citing 'long-term investments take time.' Pattern of deferring near-term expectations.

Analyst raised concern on weak cash conversion (profit not supported by operating cash flow). Management dismissed as 'seasonal receivables' issue, claimed 'improved.' CFO acknowledged receivables 'a little bit there' but no quantified improvement metric given. Risk is small but not fully resolved.