Ovostar egg production rises 1% yoy, egg sales drop 20% yoy in 1H20

Egg producer Ovostar Union (OVO PW) reported in its
July 22 trading update that its 1H20 shell egg production rose 1.4% yoy to 793
mln units. The company’s total hen flock rose 9.0% yoy to 8.24 mln and the
laying hen flock increased 6.1% yoy to 6.91 mln.

The company’s shell egg sales dropped 19.7% yoy to 490
mln units and its egg export volume plunged 49.6% yoy to 169 mln units in 1H20.
Its shell egg prices slid 6.3% yoy to USD 0.059/unit in 1H20. Ovostar processed
290 mln eggs (a 1.0% decrease yoy) and sold 6,401 t of liquid egg products
(9.0% decline yoy) as their export volume dropped 29.1% yoy to 2,467 t in 1H20.
The sales of dry egg products jumped 61.0% yoy to 1,658 t and export volumes
surged 70.6% yoy to 1,218 t in 1H20.

In 2Q20, the company’s egg production rose 0.8% yoy to
401 mln units (or a 2.3% increase qoq). Shell egg sales decreased 9.5% yoy to
249 mln units (or 3.3% rose qoq) and export volumes dropped 40.9% yoy to 88 mln
units (or 8.6% growth qoq) in 2Q20. The average price of shell eggs was USD
0.059/unit in 2Q20, which is 5.9% higher yoy and flat qoq.

Andriy Perederey: The
company’s decline in shell egg sales was driven by falling demand caused by the
COVID-19 pandemic, though it strived to minimize the negative impact on its
operations. Its laying hen flock increased and its egg production was almost at
the same level in 1H20 on a yoy basis. Nonetheless, the results imply Ovostar’s
1H20 revenue reached USD 43.5 mln, a 19% decline yoy, based on our
calculations.

So we expect Ovostar’s 1H20 financials to weaken
due to falling shell egg sales and export volumes caused by the COVID-19
pandemic. We are keeping our neutral view on Ovostar stock.