Wizz Air - Wizz Tops Estimates, Reached Flight Altitude

WIZZ AIR- Instant Earnings Comment

Recommendation:  Neutral (prev. Accumulate)

Target price (12M): GBP 36.0 (unch.)

 

• Highlights: Wizz Air published its Q1/20 report today, BMO. The carrier earned net profit of EUR 72.4mn (+42% YoY) in Q1/20, 14.7% ahead of our estimate. Profit guidance left unchanged between EUR320-350mn, however FY guidance of some KPIs has been upgraded. The Company expects a capacity growth of 20% YoY vs. previous estimate of 16% YoY.

 

• Wizz Air reported stunning growth rates for Q1/20: (1) Total seat capacity +18.1% YoY; (2) PAX +20.1% YoY; (3) LF +1.5ppts YoY @ 93.6%. Outstanding results were positively influenced by Easter effect as well.  

 

• Net revenues came in at EUR 691mn (+25.4% YoY), 2.2% ahead of our estimate, buoyed by stron ancillary revenue performance. Operating results were broadly in line with our expectation of between EUR 590-600mn, totalling EUR 598.6mn in Q1/20.

 

• call takeaways: Wizz Air is not chasing market share, but it wants to stimulate market. CEO sees market penetration is still low in CEE, added weaker carriers, including national airlines (e.g. Tarom - RO, LOT - PL, UIA - Ukraine) are reducing their capacities, which is beneficial for Wizz Air. About Vienna base, CEO also mentioned that Wizz is poised to increase its fleet size to around 15-20 aircraft within 3-5 years. Mr. Varadi stressed that the carrier is the only airline, which can reach break-even at the moment in the Austrian market, others operate loss-making bases. About unionization, the CEO told that Wizz Air has a significantly different Company culture than that of WE rivals. Mgmt occasionally visits and focuses on employees.

 

• Recommendation/outlook: We are of the view that Wizz Air is fundamentally strong and operates amid more favourable conditions in the CEE region than that of rivals in Western Europe. We assume that Wizz Air reached the flight altitude above our TP of GBP 36.0, but until obtaining visibility about the summer period, we don’t see further upside potential in the share, therefore we downgrade our recommendation to Neutral from Accumulate. Traffic statistics will be very important, next coming on 4^th/Aug, whereas we are confident that Wizz Air will post a record high profit for Q2, buoyed by strong performance of ancillary revs again.

 

 

Gabor Bukta
analyst

CONCORDE SECURITIES LTD.

Alkotás Point
55-61 Alkotás street, H-1123 Budapest.
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MEMBER OF THE CONCORDE GROUP

 

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