Art Capital Research: Avangard holds Investors’ Day
October 15, 2012
Avangardco Investments Public Limited, Ukraine’s largest egg producer, held an Investor’s Day on Thursday, which included a meeting with the management and a visit to the Chornobaivske production site. Management affirmed its Capex program and operating targets. All three investment projects – Avis, Chornobaivske and Imperovo – are developing on schedule. They will be commissioned by the end of 2013 and are projected to run at full capacity in 2014. It allows the company to produce around eight billion eggs in 2014. Given a high per capita consumption in Ukraine, Avangard’s market share in Ukraine’s shell egg segment is projected to stabilize at 55-60%. The rest of eggs produced by Avangard’s facilities will be processed or exported – exports’ total share in revenue may reach 30%. In 2012, Avangard has entered 14 new markets, mainly in North Africa, while Iraq remains its core export market with around an 80% share. On the domestic market, the company continues developing its Kvochka brand, targeting a 16% market share in the segment of branded packaged eggs. The total share of direct sales to food retail chains is estimated at 35% of total revenue in 2012.
Andriy Patiota: In general, we keep a positive stance on the AVGR stock after the meeting with management. In our view, the meeting’s major goal was to convince investors and analysts that Avangard had a fair pricing policy, as this issue has long been one of the downward risk factors for the stock. We noticed some positive changes in daily operation control and strategic planning and assured ourselves of the management’s ability to meet operating and financial targets. However, we remain cautious on Avangard’s operating and market risks as well as on a possible Ukrlandfarming-Avangard merger, which poses additional risks to minority shareholders. We keep our SPECULATIVE BUY rating for the stock with a target price of $19.5/GDR, which reflects not only a huge upside potential but also a much higher specific risk premium of AVGR than that of Ukrainian peers.
Country of riskUkraine
Redemption (put/call option)
М/S&P/F— / — / —