Kingfisher Airlines -Q2FY11: Meets expectation...ICICI Sec

Visit http://indiaer.blogspot.com/ for complete details �� ��


Q2FY11: Meets expectation...
In Q2FY11, Kingfisher Airlines (KFA) reported consolidated revenues of |
1,382.7 crore (up 24.3% YoY, down 15.7% QoQ), which remained more
or less inline with our expectations (I-direct estimate: | 1,333.6 crore).
The growth in revenues was mainly driven by strong growth in yield per
ASKM (domestic yields up by 27% YoY, international yields up 51%
YoY) on robust demand despite a decline in market share led by
reduction in the total number of flights. It declined 10.5% YoY to 30,277
(domestic, international) due to unplanned grounding of Airbus aircraft.
At PAT level, KFA reported net loss of | 230.8 crore (I-direct estimate: |
292.4 crore). It remained marginally better on lower depreciation.


􀂃 Revenue grows over 24% on strong growth in yields
KFA’s domestic revenues grew 5% YoY to | 1,038 crore, despite a 14.8%
reduction in total no. of flights. The growth in this segment mainly came
in from rise in yields per ASKM (up 27% YoY) on robust demand for air
travel. Also, the international segment that contributes nearly 25% of the
total revenues reported robust revenue growth of 178% led by 107%
increase in total no of flights and 51% rise in the pax yield.

􀂃 Bottomline improves but still remains in the negative zone
Losses at the operating level declined from | 159 crore to | 78.5 crore
due to the improved domestic performance though it remained in the
negative territory due to fewer domestic flights and additional cost of | 73
crore incurred due to grounding of aircraft. As a result, KFA reported a
net loss of | 230.8 crore for the quarter. However, it remained marginally
better than our estimate on account of lower depreciation.

Valuation
At the CMP of | 76, the stock is trading at 1.5x and 1.2x its FY11E and
FY12E EV/EBITDA, respectively. With the return of six out of 15 grounded
aircraft coming on stream and no major capacity addition by other
players, we expect KFA to improve its revenue and market share by 37%
and ~1.5% in H2FY11E. Given the healthy economic growth potential and
stable crude oil prices, we have valued the stock at 1.25x FY12E EV/sales
and arrived at a target price of |87 with a BUY rating on the stock.