Avangard ups EBITDA, profit 1.4x yoy in 9M12

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.