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Avangard ups EBITDA, profit 1.4x yoy in 9M12

Avangard ups EBITDA, profit 1.4x yoy in 9M12

23 November 2012

Ukraine’s leading egg producer Avangard (AVGR LI) reported USD 446 mln in revenue for 9M12, up 33% yoy. The growth was mostly driven by higher shell egg prices (+20.4% yoy) and sales of shell eggs (+9.8% yoy). The average egg price was UAH 0.63 in 3Q12, 5% higher qoq and 13% higher yoy. The company’s profitability improved in 9M12 on better pricing, with revaluation-adjusted EBITDA up 46% yoy to USD 166 mln and operating cash flow before working capital having improved 43% yoy to USD 165 mln. Avangard posted a 9M12 profit of USD 157 mln, up 43% yoy. The company’s laying hen flock increased 6% yoy to 21.6 mln as of end-September and the company guided on a further increase in laying hens by 6.4 mln (+30%) by the end of 2013.

Alexander Paraschiy: The company’s results for 3Q12 imply an EBITDA margin of 39% (vs. 35% in 3Q11), which is a radical difference from its peer Ovostar (OVO PW), which cut its EBITDA margin to 22% in the quarter (also 35% in 3Q11). We see Avangard’s advantage in input prices as the main reason, mostly likely due to purchases of soft commodities from its related company,Ukrlandfarming. Another issue is egg pricing: Avangard’s eggs were reportedly 9% more expensive in 3Q12 compared to Ovostar’s products (UAH 0.63/unit vs. UAH 0.58/unit, respectively). This pricing advantage has no obvious explanation. Even accounting for these issues, Avangard stock looks attractive as it trades at 3.3x EV/EBITDA 2012 vs. Ovostar’s 9.2x and MHP’s (MHPC LI) 5.0x.

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