Logging record growth in FY22, are investors overlooking Hydration Pharmaceuticals Company?

Posting record sales in FY22 in its June quarterly results, the Hydration Pharmaceuticals Company (ASX:HPC) is poised to continue a strong commercial trajectory through FY23. 

The ASX-listed HPC may not be a household name, but its flagship product is. 

The company produces Hydralyte, the electrolyte rehydration product popular with gymgoers, patients suffering with conditions causing dehydration, and of course, drinkers looking for a hangover cure. 

Listing on the ASX late last year, the company’s share price has fallen from the 30c range to 15c today, despite the company hitting its highest ever sales count in the June quarter. 

Worth noting: sales are up in North America, even as the region struggles with record inflation.

The three months to the end of June saw HPC take in over $2.95m in revenue, an increase of 42% on the previous period, and 56% year-on-year. 

Year on year growth for the company in FY22 represented an 80% increase over that in FY21; gross margins are up 60%, reflecting a significant boost in sales. 

The largest shareholder is the company’s founder, Dan O’Brien, followed by former Swisse boss Radek Sali. Company CEO Oliver Baker is also former Swisse cadre, and Chairman George Livery is non-exec director at BOD Australia (ASX:BOD). 

What, and where, are HPC’s operations? 

Despite being listed on the ASX, the company owns the rights to Hydralyte in Australia, Africa, and the Middle East, through intermediary Prestige Brands. 

However, HPC owns Hydralyte outright in North America (including both USA and Canada), as well as in the UK and China. 

The latter two markets are the targets of ongoing growth behind closed doors at HPC headquarters in San Diego. 

A chart displaying HPC's sales performance quarter-by-quarter. Orange segments of each bar reflect E-Commerce sales (Source: Hydration Pharmaceuticals Company)

USA and Canada key jurisdictions 

The bulk of sales revenue for HPC is largely split 50/50 between the USA and Canada. 

The company has its products in every single pharmacy in Canada where it holds a 28% market share of the relevant market, as well as a growing relationship with Amazon in the US, where monthly subscriptions for regular deliveries have grown through 2022 to over 20,000 households. 

Through Amazon alone, HPC pulls in roughly $45k a month. 

Further, June quarterly growth for Canadian retail sales at bricks and mortar locations has grown 80%, despite exiting Walmart Canada. 

Company management noted in a recent presentation the Northern Summer is typically a period of higher sales for the company, as those venturing outdoors in the summer heat tend to acquire summer thirst. 

With summer temperatures forecast to stay elevated for the foreseeable future, there is significant upside potential for the company’s rehydration product in the North American market (as well as down under.) 

Company leveraging Instagram influencers 

Worth noting is HPC’s emerging relationship with popular Instagram follower Shay Mitchell, who was the third most followed pregnant woman on Instagram after Britney Spears and Rhianna. 

Mitchell’s 40m followers have allowed HPC to rake in over 4m impressions through the June quarter. 

The use of high-impact influencers ties in with HPC’s ongoing e-commerce strategy, which HPC notes facilitates up roughly ⅓ of all North American wellness sales. 

HPC moving into China 

The company has also just kicked off a new relationship with a distributor in China, with the company quickly progressing to $1k in sales a day. 

The company’s initial shipment of product to the warehouse in question rapidly sould out, underscoring the commercial potential of the Chinese market. 

While the company can not yet point to sustained revenue growth in the Chinese market, more products are on the way to China. 

What remains to be seen is whether initial success was due to real demand for the product, or the natural interest roused by a new product. 

Since listing late last year, HPC was performing well until June 2022, when inflation and recession concerns slammed equities markets. With heavy exposure to the US, investors are likely nervous. But with record sales logged in tough market conditions, are shareholders missing out?