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Jet Airways (JETIN)
N(V): But for the INR, 4QFY12 trends encouraging
4QFY12 performance was better than expected on lowerthan-
anticipated costs
Domestic yield improvements to drive future performance;
international business likely to benefit from weakening full
service rivals; fuel price decline to allay cost pressures
Remain N(V) with a target price of INR350; yield and fuel trends
are encouraging, just waiting for the INR slide to reverse
4QFY12 performance better than expected. Jet Airways reported a consolidated loss of
INR3.5bn for the January-March quarter versus a loss of INR1.9bn in the same period last
year. There was a INR300m non-recurring gain from the reversal of foreign exchange
losses booked earlier. Stripping this gain out, we estimate that the recurring loss of
INR3.8bn was below our forecast loss. The main driver of the increased loss was the 9%
y-o-y increase in unit yields more than offsetting the 13% increase in unit costs. The
performance was better than expected, largely on account of lower-than-forecasted costs.
Trends encouraging. In its outlook statement, Jet Airways said, “Capacity reduction in the
industry has helped the domestic airlines to increase fares and improve yields. The full
impact of the same would be felt in the current quarter. We have not seen any adverse effect
on the passenger traffic flow. Rupee depreciation and Crude Oil prices continues to be a
cause of concern.” Our previous concerns over the underperforming international business
were allayed by this quarter’s performance. Jet’s domestic business and JetLite should see
better performance ahead as the benefits from improved industry dynamics flow in.
Remain Neutral (V), target price of INR350. As earnings show signs of a recovery,
valuations tend to be driven by earnings. We continue to value Jet Airways on EV/EBITDAR.
As Jet Airways’ own trading range is very volatile, we apply a multiple of 8x (the average of
the implied one-year forward EV/EBITDAR at our target for the three Chinese airlines under
our coverage). This implies a target price of INR350, and we maintain our Neutral (V) rating
on the stock. Key upside risks are better-than-expected traffic and yield performance, a
reversal of the INR slide, and a continued fall in fuel price. Key downside risks are a stall in
traffic from upward yield revisions and a further weakening of the INR.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Jet Airways (JETIN)
N(V): But for the INR, 4QFY12 trends encouraging
4QFY12 performance was better than expected on lowerthan-
anticipated costs
Domestic yield improvements to drive future performance;
international business likely to benefit from weakening full
service rivals; fuel price decline to allay cost pressures
Remain N(V) with a target price of INR350; yield and fuel trends
are encouraging, just waiting for the INR slide to reverse
4QFY12 performance better than expected. Jet Airways reported a consolidated loss of
INR3.5bn for the January-March quarter versus a loss of INR1.9bn in the same period last
year. There was a INR300m non-recurring gain from the reversal of foreign exchange
losses booked earlier. Stripping this gain out, we estimate that the recurring loss of
INR3.8bn was below our forecast loss. The main driver of the increased loss was the 9%
y-o-y increase in unit yields more than offsetting the 13% increase in unit costs. The
performance was better than expected, largely on account of lower-than-forecasted costs.
Trends encouraging. In its outlook statement, Jet Airways said, “Capacity reduction in the
industry has helped the domestic airlines to increase fares and improve yields. The full
impact of the same would be felt in the current quarter. We have not seen any adverse effect
on the passenger traffic flow. Rupee depreciation and Crude Oil prices continues to be a
cause of concern.” Our previous concerns over the underperforming international business
were allayed by this quarter’s performance. Jet’s domestic business and JetLite should see
better performance ahead as the benefits from improved industry dynamics flow in.
Remain Neutral (V), target price of INR350. As earnings show signs of a recovery,
valuations tend to be driven by earnings. We continue to value Jet Airways on EV/EBITDAR.
As Jet Airways’ own trading range is very volatile, we apply a multiple of 8x (the average of
the implied one-year forward EV/EBITDAR at our target for the three Chinese airlines under
our coverage). This implies a target price of INR350, and we maintain our Neutral (V) rating
on the stock. Key upside risks are better-than-expected traffic and yield performance, a
reversal of the INR slide, and a continued fall in fuel price. Key downside risks are a stall in
traffic from upward yield revisions and a further weakening of the INR.
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