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Jet Airways - Shifting focus towards international market...
In Q3FY11, Jet Airways (JAL) reported consolidated revenues of |
3,957.9 crore, which was lower than our expectations (I-direct estimate:
| 4,151.1 crore) on account of shifting of more flights towards
international routes where average revenue per passenger declined
marginally by 0.4% YoY. Domestic operations (i.e. 51% of total
revenues) outperformed with revenues growing 20.3% YoY (i.e.
including JetLite) while international revenues (i.e. 49% of total
revenues) grew 18.6% YoY during the same period. However, that
shifting has helped the company to improve its operating margins by
~116 bps on account of higher margins on international operations.
With Improved margins and lower depreciation, the company reported
PAT growth of 31.1% to | 143.8 crore. However, the same remained
lower than estimates (| 197.1 crore) on higher tax outgo (i.e. tax
payment of | 99.3 crore vs. nil last year).
Market share declines on focus shift towards international regions…
JAL’s market share in the domestic market declined to 26.2% in Q3FY11
(vs. 26.9% in Q3FY10) on shifting of flights towards international routes.
Number of flights for international routes increased 12.8% YoY to 8,714,
while domestic flights rose by only 4.4%. This led to a decline in the
domestic market by 80 bps YoY to 26.2% for the quarter.
…but operating margins improve
International operations command higher operating margins. This shifting
strategy has helped the company to improve its operating margins
despite a sharp rise in fuel costs.
Valuations
At the CMP of | 475, the stock is trading at 8.2x and 5.0x its FY11E and
FY12E EV/EBITDA, respectively. We expect the company to grow their
topline by 19.5% and 14.8%, respectively, on rising pax traffic. However,
rising fuel cost remains a concern for the company, going forward. We
have assigned an ADD rating to the stock with a target price of | 520 (i.e.
valuing the company at 5.5x FY12E EBITDA.
During the quarter, Jet Airways’ domestic pax-traffic grew by 16.3% YoY
while JetLite’s pax-traffic grew 14.3% YoY (vs. 19.5% YoY for the sector).
On the other hand, international pax-traffic witnessed an impressive
growth of 18.6% YoY. The international division of the airline has
benefited from the higher utilisation of fleets, improving code-sharing
agreements and focused customer services. Further, Jet Airways is
witnessing improved traction in the international pax-traffic partly due to
addition of new flights through the hubs in Delhi and Mumbai.
In Q3FY11, the overall blended yield of Jet Airways increased by 7.4%
YoY to | 3.9 driven by strong demand in the domestic as well as
international market. The airline has also started witnessing a recovery in
the premium (primarily business class) traffic.
During the quarter, Jet Airways reported a domestic operating margin of
16.4% vs. 15.2% in the same quarter previous year. On the other hand,
the international operating margin declined marginally by 30 bps to
19.7% in Q3FY11 vs. 20% in Q3FY10. Nevertheless, it continued to
remain higher than domestic operations. The airline has also benefited
from the international share code agreement with airlines such as United
Airlines and Gulf Air. Jet Airways is also in the process of signing codeshare
agreements with other international airlines.
Details of Jet Airways’ financial performance are as follows:
• Jet Airways’ consolidated operating revenues grew by 19.5% YoY
to | 3,957.9 crore in Q3FY11 driven by robust growth in domestic
as well as international demand. The share of international
revenues in total consolidated revenues was 48.8% (vs. 49.2% in
Q3FY10). Jet Airways’ (standalone) load factor improved to 76.9%
(vs. 75.4% in Q3FY10) in the domestic market and 80.6% (vs.
82.5% in Q3FY10) in international market. JetLite’s load factor
improved to 82.6% in Q3FY11 (vs. 78.8% in Q3FY10)
• Jet Airways’ (standalone) employee expenses increased by 15.9%
YoY while that of JetLite’s increased by 11.5% YoY primarily on
account of salary jumps during the quarter. Also, fuel and selling
and distribution expenses increased by 23% YoY and 14%,
respectively, for the standalone business during the quarter
• The standalone net margin was positive at 3.4% in Q3FY11 (vs.
3.65% in Q3FY10). On the other hand, JetLite’s net margin
increased sharply to 3.7% vs. 0.9% last year. As a result, Jet
Airways reported consolidated net margins of 3.6% in Q3FY11
(vs. 3.3% in Q3FY10)
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Jet Airways - Shifting focus towards international market...
In Q3FY11, Jet Airways (JAL) reported consolidated revenues of |
3,957.9 crore, which was lower than our expectations (I-direct estimate:
| 4,151.1 crore) on account of shifting of more flights towards
international routes where average revenue per passenger declined
marginally by 0.4% YoY. Domestic operations (i.e. 51% of total
revenues) outperformed with revenues growing 20.3% YoY (i.e.
including JetLite) while international revenues (i.e. 49% of total
revenues) grew 18.6% YoY during the same period. However, that
shifting has helped the company to improve its operating margins by
~116 bps on account of higher margins on international operations.
With Improved margins and lower depreciation, the company reported
PAT growth of 31.1% to | 143.8 crore. However, the same remained
lower than estimates (| 197.1 crore) on higher tax outgo (i.e. tax
payment of | 99.3 crore vs. nil last year).
Market share declines on focus shift towards international regions…
JAL’s market share in the domestic market declined to 26.2% in Q3FY11
(vs. 26.9% in Q3FY10) on shifting of flights towards international routes.
Number of flights for international routes increased 12.8% YoY to 8,714,
while domestic flights rose by only 4.4%. This led to a decline in the
domestic market by 80 bps YoY to 26.2% for the quarter.
…but operating margins improve
International operations command higher operating margins. This shifting
strategy has helped the company to improve its operating margins
despite a sharp rise in fuel costs.
Valuations
At the CMP of | 475, the stock is trading at 8.2x and 5.0x its FY11E and
FY12E EV/EBITDA, respectively. We expect the company to grow their
topline by 19.5% and 14.8%, respectively, on rising pax traffic. However,
rising fuel cost remains a concern for the company, going forward. We
have assigned an ADD rating to the stock with a target price of | 520 (i.e.
valuing the company at 5.5x FY12E EBITDA.
During the quarter, Jet Airways’ domestic pax-traffic grew by 16.3% YoY
while JetLite’s pax-traffic grew 14.3% YoY (vs. 19.5% YoY for the sector).
On the other hand, international pax-traffic witnessed an impressive
growth of 18.6% YoY. The international division of the airline has
benefited from the higher utilisation of fleets, improving code-sharing
agreements and focused customer services. Further, Jet Airways is
witnessing improved traction in the international pax-traffic partly due to
addition of new flights through the hubs in Delhi and Mumbai.
In Q3FY11, the overall blended yield of Jet Airways increased by 7.4%
YoY to | 3.9 driven by strong demand in the domestic as well as
international market. The airline has also started witnessing a recovery in
the premium (primarily business class) traffic.
During the quarter, Jet Airways reported a domestic operating margin of
16.4% vs. 15.2% in the same quarter previous year. On the other hand,
the international operating margin declined marginally by 30 bps to
19.7% in Q3FY11 vs. 20% in Q3FY10. Nevertheless, it continued to
remain higher than domestic operations. The airline has also benefited
from the international share code agreement with airlines such as United
Airlines and Gulf Air. Jet Airways is also in the process of signing codeshare
agreements with other international airlines.
Details of Jet Airways’ financial performance are as follows:
• Jet Airways’ consolidated operating revenues grew by 19.5% YoY
to | 3,957.9 crore in Q3FY11 driven by robust growth in domestic
as well as international demand. The share of international
revenues in total consolidated revenues was 48.8% (vs. 49.2% in
Q3FY10). Jet Airways’ (standalone) load factor improved to 76.9%
(vs. 75.4% in Q3FY10) in the domestic market and 80.6% (vs.
82.5% in Q3FY10) in international market. JetLite’s load factor
improved to 82.6% in Q3FY11 (vs. 78.8% in Q3FY10)
• Jet Airways’ (standalone) employee expenses increased by 15.9%
YoY while that of JetLite’s increased by 11.5% YoY primarily on
account of salary jumps during the quarter. Also, fuel and selling
and distribution expenses increased by 23% YoY and 14%,
respectively, for the standalone business during the quarter
• The standalone net margin was positive at 3.4% in Q3FY11 (vs.
3.65% in Q3FY10). On the other hand, JetLite’s net margin
increased sharply to 3.7% vs. 0.9% last year. As a result, Jet
Airways reported consolidated net margins of 3.6% in Q3FY11
(vs. 3.3% in Q3FY10)
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