Jet Airways: Stellar quarter: Results beat estimates:: BoA ML

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Jet Airways
Stellar quarter: Results beat
estimates
􀂄 Raise PO on improving international business
Post strong 2QFY11 results, we raise our EBITDAR estimates by 2%/6% for
FY11E/12E on (a) improving international yields (raised by 3%/4% for FY11/12),
(b) increase in traffic assumption for FY11/12 (raised by 5%/7% for international)
and (raised by 1%/4% for domestic). This coupled with lower dilution leads to EPS
revision of 2%/12% for FY11/12. We raise our PO to Rs915 (from Rs765) on a
similar target multiple of 8X FY12E EV/EBITDAR.
2QFY11: EBITDAR 30% ahead of estimates
In a seasonally weak qtr, Jet (ex-sub JetLite) reported net profit of Rs123mn in
Q2FY11 compared to loss of Rs4.1bn in 2QFY10. Excluding exchange gains and
MTM derivative losses Jet made a loss of Rs270mn. Operating revenues at Rs
31bn (+32% YoY; 5% QoQ) was 9% ahead of MLe of Rs28.4bn. This was due to
better than expected yields in international segments. EBITDAR margin at 22.1%
was higher than our estimate of 18.6%.
International business: Seats full & fare rising
Recovery in premium traffic coupled with a tight industry capacity environment
has led to faster than expected recovery in yields & traffic. International yield for
the quarter was up 11.6% YoY and 6.3% QoQ. Jet has focused on short haul
routes in the select SAARC, ASEAN & Middle East. These routes in turn have
started acting as feeder routes for the long haul US/UK routes due to the lack of
any strong national carrier in these regions.
Domestic business: Bettering expectations
Despite a seasonally weak quarter, Jet was able to clock an EBITDAR margin of
16.8% (MLe 11%) on account of (a) lower than expected fall in gross yields and
(b) higher ancillary revenue. Jet is expected to post a strong quarter in the coming
festive season on 15% expected increase in yields and improved demand.