Ovostar boosts EBITDA 19%, net profit 26% in 9M14

Обзоры по компаниям и отраслям 14.11.2014 Ukrainian egg producer Ovostar (OVO PW) reported a 1% yoy decline in its revenue to USD 53.4 mln in 9M14, according to its Nov. 14 filing. Revenue in its flagship shell egg segment rose 7% yoy for the period to USD 37.0 mln, fueled solely by boosted egg sales. Revenue in its egg product segment decreased 17% yoy, caused by dropping volumes and prices for liquid egg products. Ovostar’s EBITDA increased 19% to USD 21.1 mln in 9M14, and its bottom line advanced 26% yoy to USD 18.8 mln. Ovostar’s cash flow from operations increased 1% yoy to USD 13.0 mln in 9M14, while cash outflow from investment activity fell 19% yoy to USD 14.6 mln. Due to its negative free cash flow, the company slightly increased its net debt to USD 7.0 mln, thus remaining one of the least leveraged companies in the Ukrainian equity universe. Its total debt decreased 19% YTD to USD 11.0 mln. The company’s laying hen flock increased 16% yoy to 4.3 mln as of end-September 2014. The company produced 740 mln eggs (+14% yoy) and sold 493 mln eggs (+20% yoy) in 9M14. Both export (+185% yoy) and domestic (+9% yoy) destinations increased. The average price of a shell egg advanced 16% yoy in the local currency to UAH 0.756 per unit. Ovostar processed 232 mln eggs (+17% yoy) into dry and liquid egg products in 9M14. Sales of liquid egg products decreased 9% yoy, while volumes of dry products sold increased 5% yoy in 9M14. In 3Q14 alone, Ovostar’s P&L looked less attractive, with revenue having declined 12% yoy (to USD 18.5 mln). Its EBITDA and bottom line both amounted to USD 7.6 mln, or 7% lower yoy in 3Q14. Notably, the company’s EBITDA margin increased 2pp yoy to 41% in 3Q14. Alexander Paraschiy: Thanks to its low leverage, the company managed to carry out its investment program in the tough year of 2014 and demonstrate strong operating and financial performances. This, as well as the limited exposure to occupied regions of Ukraine (only its liquid egg product segment suffered from the crisis in Donbas), makes the company the most attractive equity investment story this year. The only external factor that negatively affected the company’s results was heavy devaluation of the Ukrainian currency in 3Q14 (as Ovostar is focused on the local market). One of our key points of concern is that Ovostar’s average egg prices increased only 14% yoy in 3Q14, when average Ukrainian egg prices rose 21% yoy in this period, according to official statistics. Yet Ovostar’s price data looks more reliable than Avangardco’s (whose prices increased only 12% yoy, even though it reportedly shifted more emphasis onto its premium segment).