Ovostar egg production slides 3% yoy in 1H18

Ukrainian egg firm Ovostar Union (OVO PW) reported
that its 1H17 shell egg production decreased 3.4% yoy to 787 mln units, 
according to its July 24 operating update. The company’s total hen flock
decreased 6.3% yoy to 7.4 mln and laying hen flock dropped 7.5% yoy to 6.2 mln.

The company’s shell egg sales jumped 31.1% yoy to 787
mln units and its egg export volume more than doubled yoy to 294 mln units in
1H18. Its shell egg prices increased 42.8% yoy to UAH 1.86/unit in 1H18.
Ovostar processed 280 mln eggs and sold 5,867 tons of liquid egg products
(20.6% growth yoy), while the export volume of liquid egg products increased
57% yoy to 2,904 tons in 1H18. On the other hand, the sales of dry egg product
dropped 24.8% yoy to 1,382 tons, while export volumes increased by 30.1% yoy to
980 tons in 1H18.

In 2Q18, the company’s egg production decreased 2.4%
yoy to 401 mln units (or 3.9% growth qoq). Shell egg sales increased 39.3% yoy
to 337 mln units (or slid 1.5% qoq), while export volumes surged 2.5x yoy to
294 mln units (or 13.0% yoy growth) in 2Q18. The average price of shell eggs
was UAH 1.65 per unit in 2Q18, which are 39.5% higher yoy and 19.5% weaker qoq.

Andriy Perederey: The company’s egg production decrease was driven by a decline in the
laying hen flock and it is our point of worry. But weak production statistics
is offset by increasing export volumes. The share of shell egg exports rose to
43.0% in 1H18 vs. 28.0% a year ago, while the share of export volumes of dry
egg product rose to 71% in 1H18 vs. 41% a year ago. So we see that Ovostar will
demonstrate about a 71% yoy jump in net revenue in USD terms in 1H18. Also, the
company’s EBITDA might nearly double yoy in 1H18. We remain neutral on Ovostar
stock, but expect a positive market reaction to the company’s strong operating
results.