A short presentation on Hester Bioscience, a listed company in India. Hester Bioscience is actively engaged in Poultry Vaccines, Animal Health Business.

1. Hester Bioscience Ltd
(BSE Code: 524669)
Presentatio by: Tejas Jariwala
Jainam Wealth
Date: 25-03-2017

2. Vote of thanks!
Let me all thank…
Ø Jainam Wealth Research Team - Mr.Vardhan Gandhi
Ø Pioneers in Value Investing..
Ø Fellow value investors..
Ø Managements of companies we invest in...
AND THANK YOU
FOR COMING!!!

3. ü Global animal healthcare market was valued at USD 32,081.5 mn
(~Rs.208530 Cr) in 2014 and is expected to rise to USD 43,032.1 mn
(~Rs.280000 Cr) by 2020 at a CAGR of 5.1 %.
ü Increasing adoption of pets in emerging economies such as India and China
are driving pet vaccinations in emerging economies and increasing the global
demand for meat, milk and eggs, steadily pushing feed additives,
pharmaceuticals and vaccine sales around the world.
ü Demand is expected to increase in the emerging markets of India, Indonesia,
Thailand, Vietnam, Brazil Argentina, Chile, Israel, CIS countries Ukraine,
Russia, South Africa and China.
Industry Overview - Global Veterinary Market

4. ü The Indian veterinary healthcare market was estimated at Rs.6800 Cr in 2014
and expected to reach Rs.15900 by 2020, reporting a CAGR of 15.2 per cent.
ü Though the market size of animal health products worldwide is approximately
Rs.156000 Cr (as of 2014), currently the Indian size is just Rs.3270 Cr but it is
growing at a very fast pace so offers a good scope for the future.
ü Per capita chicken consumption in India has been on the rise. At present, urban
markets account for about 80% of demand but rural demand is expected to pick
up.
ü The PPR vaccine is to be administered annually to a target population. The
targeted global sheep and goat population for PPR vaccine is 1.70 billion; the
targeted Indian population is 200 million.
Industry Overview - Indian Veterinary Market

5. About Company
ü Hester Biosciences Ltd is engaged in the manufacturing of Poultry Vaccines.
The company is a 100% biotech company producing animal biologicals. They
currently manufacture 39 types of poultry vaccines against various poultry
diseases.
ü Product range includes Live Vaccines, Killed Vaccines, Diagnostic kits &
Seromonitoring services.
ü The 4 verticals: Poultry Vaccines, Large Animal Vaccines, Poultry Health Products
and Large Animal Health Products.
ü Company’s product portfolio comprises of over 50 vaccines and over 35 health
products.
ü Hester is the 2nd largest producer of poultry vaccines in India with a market
share of 28-30 % (1st is Venky's)
ü 87 % of the revenues are derived from the poultry vaccines segment. This segment
grew at a CAGR of 20% over FY 2011 to FY 2015 and the Company expects the
segment to grow at a CAGR of 16% over FY 2015-18.
ü Company manufactures both strain of PPR vaccines (Goat & Sheeps) .i.e.
Nigerian and Sungari (Indian)
Hester Biosciences Ltd

6. About Company
ü 1st to launch Goat vaccines in India.
ü Launched new Brucella vaccine which is both in tender business & private
distribution & marketing so is expected to drive growth in large animal
vaccine segment.
ü For Brucella vaccine size of Indian market is 15-20 Cr they are second private
manufacturer in India
ü Hester’s Nepal plant will manufacture and export PPR vaccines. Commercial
operations have been commenced from Nov 15, 2016
ü They have 2 vaccine to bid internationally one PPR from Nepal and other
Brucella vaccine from India.
ü To bolster its distribution capabilities in Africa, Hester registered a Company
named ‘Leruarua Vetcare (Proprietary) Limited’ under the trade name of
Vetsol in Botswana with 49% stake.
ü Leruarua Vetcare (Proprietary) Limited is in the business of trading for the
Poultry Vaccines and Large Animal Vaccines & Health Products
ü The Company’s current international presence spans over 18 countries
ü Company intends to acquire 55% stake of Texas laboratories (located at
Mehsana) who is manufacturer of pharma formulation, tablets, capsules,
injections. (Animal related)
Hester Biosciences Ltd

8. Rationale..(Growth Drivers)
ü India has the largest cattle population in the world. It accounts for 31.05 %
of the world cattle population with an estimated 301,600,000 units of in
May 2016. This presents a massive opportunity for the animal healthcare
market.
ü Poultry has a crucial place in India as the eggs and chicken meat are
important and rich sources of protein, vitamins and minerals. Many Indian
families, especially the educated people in urban areas, have begun to
accept eggs as a regular supplemental part of their vegetarian diet.
ü The annual per capita consumption of poultry in India (in 2015) was merely
3.1 kg compared with 17 kg in developed countries.
ü Company’s large animal business revenue grew by 73.23 % (Newly started
division in 2015). It's export earnings 73.66 %, which reduced its
dependence on the domestic market.
ü The targeted global sheep and goat population for PPR vaccine is Rs.170 Cr;
the targeted Indian population is Rs.20 Cr.
ü The price of PPR vaccine as high as 10 US cents (Rs 6 per dose) while the
company’s selling price in India is approximately around 2.5 to 3.5 cents
(around Rs.2 per dose)
What we like.....

9. Rationale..(Growth Drivers)
ü The world market for PPR vaccine is slated to be for Rs.300 Cr.annually. The
Indian market is slated to be Rs.40Cr annually. Hester is looking to
aggressively market PPR and goat pox vaccines in India.
ü Hester is pursuing R&D to manufacture recombinant poultry vaccines, which
Hester expects to patent in about 2 years. Hester believes that is the only
Indian company right now working on a Recombinant Poultry Vaccines.
ü Recombinant vaccine would command premium price and would have
higher margins compared to conventional vaccines.
ü CARE has upgraded credit ratings (Long Term credit facility BBB+ to A-) &
(Short Term credit facility A3+ to A2) of the company so company will get
benefit of interest leverage in coming quarters.
ü Goat pox and Brucella vaccines are not imported in India. Neither Indian
Immunologicals are supplying got pox and Brucella in India.
ü Brucella (Cattle Vaccines)has good market internationally, which is more
than PPR vaccine, but for first 6-8 months they will only focus in India and
then will go to African market.
What we like.....

10. Hester’s Strength Cold Storage and Distribution
ü The distribution network is an important aspect as vaccines generally need
to be stored between 4 to 8 degrees Celsius, and some required to be stored
at minus 196 degrees Celsius.
ü The Company has established a strong, multi locational cold chain for the
distribution and storage of vaccines. Most of the places in African countries
have hot climate, are very remote and lack widespread refrigeration. Thus,
storage points and transportation network are critical for the success of
vaccines business.
ü The company has put a lot of focus on the African market for distribution
and thus has appointed distribution agents/centres in various countries
mainly in Southern part of Africa as well as Eastern Africa.
What we like.....

11. Entry Barriers
ü Vaccine R&D and large scale manufacturing is a niche business with tall
entry barriers. Vaccines are biological i.e. made from living microorganism,
unlike many medicines that are chemically synthesized.
ü Biologics manufacturing technology is complex and very difficult to replicate,
which is why there are only a handful of manufactures in India - Venky’s,
Indian Immunologicals, and Indovax are the only major manufacturers
besides Hester.
ü Also availability of strain in order to make vaccines is another issue.
ü Another major barrier is the cold storage depots and distribution network,
which forms the backbone of this business. Hester has its own depots in
Chandigarh, Pune, Bengaluru, Coimbatore and Hyderabad.
ü All Vaccines are transported by Hester-owned refrigerated vans under 4-8
degree Celsius. Cold storage and distribution is capital-intensive and is most
efficient when owned by the company itself.
ü Others --submitted 92 dosseries, patent likely in the coming years
ü Increasing focus on export revenues (presently ~10% of total revenue)
What we like.....

12. Financial Highlights..

13. Financial Highlights..

14. Risk
ü Contagious viral Diseases - and other flue which adversly affect the business
whereby poultry owner has to destroy live stocks.
ü Competition because of high entry barrier, nich business and good margins.
It may easy for large pharma conglomerate to focus this kinda business.
ü Managements are over promised and delayed delivered. :)
ü Any mismanagement in storage and distribution may lead to expiry of
vaccines.
ü Our limited understanding on the diseases, vaccines types , any scientific
terms and its proper knoweldge --”Black Swan”
Pending Works for further due diligence:
ü To study sequent Scientific in detail (Demerger-Human and Animal health
division)
ü AGM / Plant Visit / Management meet
What can go wrong..

15. ü Final View:
At the CMP of Rs. 753, the stock is trading at TTM PE of 33x with the TTM EPS of
Rs.22.20. We believe, Hester is good placed in the poultry vaccines business
which is niche in the overall Pharma categeries. Nepal Plant set up, Goat
vaccines, tendering of PPR and Brucella vaccines, strong distribution channels
globally- appeals to have this company in the portfolio. :)
Disclosure: Holding tracking position in the personal portfolio. So, obviously
biasness may be there.:)
We, Jainam Wealth, a partnership firm is registerd with SEBI- Research Analyst
Regulation,2014. Our Registration Number is: INH000003218
Final View & Valuation:

16. Q & A