Model update – we reduced our TP to 32 GBP/sh

• After the fiscal Q2 results, we update our model. We remain Buy-rated, but we lower our 12m TP to 32 GBP/sh amid operational challenges. We continue to see Wizz Air as a structural winner, but execution risk is elevated amid GTF engine issues, as well as the geopolitical tension, which hurts the growth story. We cut our net profit estimates for FY24/25/26 by 21%/35%/17%, respectively. Wizz Air trades at FY24 and FY25 P/E of 6.9x/6.1x, respectively, on our estimates.
• Wizz Air may face credibility issues rather than fundamental issues over the next few quarters as the Management’s profit guidance seems to be optimistic. Wizz Air reported a disappointing set of results for fiscal Q2 as net profit missed by 23% vs. Concorde and 26% vs. consensus figures. Revenues came in at EUR 1.82bn, while net profit totalled EUR 342mn. Despite record H1 profit of EUR 401mn, Wizz narrowed its profit guidance for fiscal 2024 to the range of EUR 350-400mn from EUR 350-450mn before the loss-making H2 period. We cut our forecast for net profit to EUR 351mn from EUR 442mn.
• Fiscal Q2 report lacks positive momentum. Compared to Q1, when RASK (revenue/per available seat km) was up by 21% YoY, Q2 revenue performance was lacklustre. RASK increased by only 3% YoY in Q2, driven by a 10% increase in avg. ticket price and a 1% increase in ancillary revenue/passenger, offset by the longer stage length. As a result, both revenue stream missed estimates despite new ancillary products and bumper summer demand.