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P r e s e n t l o o k s t e n s e , w a i t f o r g o o d e n t r y l e v e l …
Jet Airways (JAL) reported consolidated revenues of | 3970.4 crore,
marginally lower than our expectations (I-direct estimate: | 4011.2 crore)
due to higher-than-expected drop in yields in the LCC segment (JetLite).
However, international operations that accounted for 57% of total
revenues outperformed with revenues growing 21.7% YoY due to strong
demand. On the other hand, domestic segments (i.e. including JetLite)
recorded lower revenue growth of 16.6% YoY due to a 10.4% drop in
JetLite’s yields (LCC segment). On the cost front, fuel rates continued to
remain high and rose sharply by over 39% YoY. This, in turn, dented
operating margins. It declined by 1132 bps to a mere 0.9%. However, a
reduction in interest costs (down 22.8% YoY) and exceptional income of |
118 crore as contribution receivable from lessor towards maintenance
helped the company to reduce its losses. As a result, JAL reported a net
loss of | 128.5 crore as against I-direct’s estimated loss of | 335.8 crore.
ƒ Domestic yield remains under pressure due to competition
During the quarter, yields for the domestic segment, especially low
cost segment (LCC), remained under pressure partly due to
competitive pricing strategy adopted by major competitors and
partly due to increase in the supply (ASKM). As a result, JetLite’s
yield declined by 10.4% YoY.
ƒ Soaring fuel prices dent operating margins
Fuel prices for the quarter rose by over 39% YoY and 12% QoQ.
The absolute difference in fuel costs for the Jet group as compared
to the same period last year was | 655.8 crore.
V a l u a t i o n s
We expect 16% revenue CAGR during FY11-13E as demand would
continue to outpace supply growth on healthy pax traffic. The BKC land
deal and aircraft sale and leaseback transactions are key things on the
company’s radar to reduce its debt burden. Further, we believe any
potential fall in oil prices will improve JAL’s profitability significantly.
However, over the medium term, the company may continue to witness
pressure in domestic yields due to the lean season and competitive
pricing environment. At the CMP of | 476, the stock is trading at 11.2x
and 6.7x its FY12E and FY13E EV/EBITDA, respectively (i.e. 10% discount
to its comparable peer matrix). We have assigned a HOLD rating to the
stock with a target price of | 520 (i.e. at 7.0x FY13E EBITDA).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
P r e s e n t l o o k s t e n s e , w a i t f o r g o o d e n t r y l e v e l …
Jet Airways (JAL) reported consolidated revenues of | 3970.4 crore,
marginally lower than our expectations (I-direct estimate: | 4011.2 crore)
due to higher-than-expected drop in yields in the LCC segment (JetLite).
However, international operations that accounted for 57% of total
revenues outperformed with revenues growing 21.7% YoY due to strong
demand. On the other hand, domestic segments (i.e. including JetLite)
recorded lower revenue growth of 16.6% YoY due to a 10.4% drop in
JetLite’s yields (LCC segment). On the cost front, fuel rates continued to
remain high and rose sharply by over 39% YoY. This, in turn, dented
operating margins. It declined by 1132 bps to a mere 0.9%. However, a
reduction in interest costs (down 22.8% YoY) and exceptional income of |
118 crore as contribution receivable from lessor towards maintenance
helped the company to reduce its losses. As a result, JAL reported a net
loss of | 128.5 crore as against I-direct’s estimated loss of | 335.8 crore.
ƒ Domestic yield remains under pressure due to competition
During the quarter, yields for the domestic segment, especially low
cost segment (LCC), remained under pressure partly due to
competitive pricing strategy adopted by major competitors and
partly due to increase in the supply (ASKM). As a result, JetLite’s
yield declined by 10.4% YoY.
ƒ Soaring fuel prices dent operating margins
Fuel prices for the quarter rose by over 39% YoY and 12% QoQ.
The absolute difference in fuel costs for the Jet group as compared
to the same period last year was | 655.8 crore.
V a l u a t i o n s
We expect 16% revenue CAGR during FY11-13E as demand would
continue to outpace supply growth on healthy pax traffic. The BKC land
deal and aircraft sale and leaseback transactions are key things on the
company’s radar to reduce its debt burden. Further, we believe any
potential fall in oil prices will improve JAL’s profitability significantly.
However, over the medium term, the company may continue to witness
pressure in domestic yields due to the lean season and competitive
pricing environment. At the CMP of | 476, the stock is trading at 11.2x
and 6.7x its FY12E and FY13E EV/EBITDA, respectively (i.e. 10% discount
to its comparable peer matrix). We have assigned a HOLD rating to the
stock with a target price of | 520 (i.e. at 7.0x FY13E EBITDA).
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