Ovostar boosts egg output 1.2x yoy, egg processing 1.5x yoy in 1Q13

Egg producer Ovostar Union (OVO PW) reported 23% yoy growth in egg production (to 214 mln units) and 49% yoy growth in egg processing (to 70 mln units) in 1Q13, according to the company’s release on April 22. The company advanced its laying hen flock 28% yoy to 4.32 mln (+3% YTD) and raised its flock of laying hens 33% yoy to 3.34 mln (+8% YTD).

The company increased shell egg sales just 2.4% yoy (to 127 mln units) due to an increased focus on its processed egg product sales. In particular, Ovostar sold 346 tons of dry egg products (+92% yoy) and 1,639 tons of liquid egg products (+61% yoy). The selling prices of Ovostar’s output were relatively strong: prices of shell eggs fell 1.7% yoy (to UAH 0.706/piece), prices of liquid egg products fell 1.8% yoy (to UAH 15.54/kg), while the average price of dry products advanced 7.9% yoy (to UAH 46.18/kg).

Alexander Paraschiy: The results indicate that Ovostar increased revenue from its egg segment by about 16% yoy to an estimated USD 16.4 mln. With an expected further increase in the company’s laying hen flock following the commissioning of new capacities, the company is set to speed up its growth in the following quarters. Therefore, we continue to regard Ovovstar as one of the most promising companies in the Ukrainian universe and we remain bullish on its stock.

We should also point out a key risk for the company’s margins in 2013, which is egg pricing on possible oversupply of the market. Recall that Ovostar is not the only Ukrainian company that plans to expand its output in 2013. The company’s increased focus on processed egg products is also an indicator of a toughened shell egg market.