Ovostar boosts egg production 16% in 9M17

Egg producer Ovostar Union (OVO PW) boosted egg production by 15.6% yoy to 1,246 mln units in 9M16, according to its Oct. 25 trading update. The growth was the result of 13% yoy increase in its laying hen flock to 6.8 mln. It sold 829 mln shell eggs (a 8.2% yoy increase), including 350 mln for export (a 48% yoy jump) and 479 mln locally (a 9.5% yoy drop). Its average shell egg price rose 8.1% yoy to UAH 1.33 in 9M17. During the period, it sold egg products at a total value of UAH 408 mln, a 9.2% yoy increase.

The above data implies that in 3Q17 alone, Ovostar produced 431 mln eggs (a 5% yoy and qoq rise) and sold 311 mln shell eggs (a 7% yoy and 29% qoq increase). Its average egg price was UAH 1.38 (a 18% yoy and 16% qoq rise).

Alexander Paraschiy: With restored egg prices in 3Q17, we expect Ovostar will improve its EBITDA margin for the quarter to about 22%, after having fallen to 11% in 2Q17 from 26% in 1Q17. All in all, we expect the company will report USD 60.0 mln in its top line in 9M17 (up 12% yoy) and EBITDA of about USD 12.1 mln (down 15% yoy). Usually, the fourth quarter is best for the egg prices and margins of egg producers, and this year is no exception. So far, Ovostar has a chance to catch up to 2016 in terms of annual EBITDA. Nevertheless, we retain our neutral view on Ovostar stock, which trades at the highest multiple in Ukrainian universe (about 8.0x trailing EV/EBITDA).