Ovostar boosts egg production 27% yoy in 2Q15

Ukraine’s egg producer Ovostar Union (OVO PW) reported a set of strong operating results for 1H15, driven by continued expansion of its capacities. The company reported an end-June laying hen flock at 4.63 mln, an increase of 12% yoy and 3% qoq. Its shell egg output accelerated 24% yoy to 580 mln units, and shell egg sales jumped 41% yoy to 421 mln units in 1H15. Egg sales volumes increased both domestically (+26% yoy) and internationally (+133% yoy to 98 mln units) as the company expanded its export destinations. In particular, the company reported it started egg shipments to the EU in June 2015. The average price of a shell egg increased 71% to UAH 1.20 in 1H15, according to the company’s report.

Its semi-annual results imply Ovostar had a strong 2Q15: egg production was 303 mln units (a 27% yoy increase) and shell egg sales were 213 mln (up 38% yoy), including 159 mln on the domestic market (a 25% yoy increase), and the average egg price was UAH 1.21 (up 78% yoy).

Alexander Paraschiy: With better egg output and, more importantly, a faster increase in egg prices as compared to the previous year, Ovostar is very likely to report improved operating profit in 1H15, even in USD terms. The company remains one of our top picks in the Ukrainian equity universe.

Ovostar’s strong operating results widens the contrast with its bigger peer, Avangardco (AVGR LI), even further. Recall, Avangardco’s egg output dropped 44% yoy in 1Q15 on a 41% yoy (9.0 mln) decrease in its laying hen flock as of end-1Q15. The company attributed its poor results to worsened domestic demand for eggs and its exit from the Crimea, Donetsk and Luhansk regions (where it had just 7.0 mln laying hens a year ago).