Agriculture
January 19, 2012
Ovostar operates a highly profitable business model featuring strong egg branding, which we believe can be maintained in the medium term. The company is targeting an ambitious increase in its flock of laying hens to 5.2mn birds by the end of 2014, up from the the current 2.45mn. We project that Ovostar’s annual shell egg output will grow at a 2010-2015 CAGR of 21.6%, reaching 1.45bn pieces. Revenue should move up at a 2010-2015E CAGR of 27.5% to USD 124.7mn, with the net margin holding steady near 31%. As Ovostar currently trades at 2011E EV/EBITDA of 9.9x, we believe that these impressive growth numbers are already priced into the OVO stock, on which we place a HOLD recommendation and a target price of USD 24.6.
