MOSL: INTERGLOBE AVIATION (Neutral)-Aggressive capacity addition in a lean quarter weighs on profitability
InterGlobe Aviation: Aggressive capacity addition in a lean quarter weighs on profitability
(indigo IN, Mkt Cap USD7.5b, CMP INR1355, TP INR1318, 3% Downside, Neutral)
INDIGO’s revenue increased 20% YoY (-6% QoQ) to INR58b (our estimate: INR60b). EBITDAR of INR11.2b (-16% YoY, -42% QoQ) came in significantly below our estimate of INR14.8b due to a lower yield of INR3.82 (est. of INR4.08; -4% YoY, -11% QoQ) and higher fuel cost of INR1.39 (est. of INR1.36; +10% YoY, +10% QoQ). Passenger ticket yield stood at INR3.31 (est. of INR3.51; -5.6% YoY, -10.6% QoQ). PAT of INR1.2b (est. of INR3.7b; -73% YoY, -85% QoQ) was further impacted by higher lease rentals of INR9.9b (est. of INR9.6b; +20.5% YoY, +5.2% QoQ). Higher other income of INR2.6b (est. of INR2.1b; -12.3% YoY, -5.2% QoQ) largely offset the impact of higher depreciation of INR1.3b (est. of INR1.15b; +22% YoY, +19.8% QoQ) and higher interest expense of INR927m (est. of INR837m; +19.4% YoY, +9.8% QoQ).
- Ticket yield down ~6% YoY: INDIGO’s ticket yield declined 6% YoY (-10.6% QoQ) to INR3.31 (est. of INR3.51), led by aggressive capacity addition in a lean quarter. Intense competition also took its toll. Total yield declined 4% YoY (-11% QoQ), led by (a) ancillary revenue (INR6.7b; +21.5% YoY, -5% QoQ) and (b) other operating income (INR1.4b; +249% YoY, flat QoQ). Other operating income was likely higher due to credits received from manufacturers.
- For full-year FY18, revenue stood at INR230b (+24% YoY), EBITDAR at INR65.7b (+25% YoY) and PAT at INR22.4b (+35% YoY), implying an EPS of INR58.3/share.
Interglobe Aviation Ltd. InterGlobe Aviation Limited, formerly InterGlobe Aviation Private Limited, is an India-based company engaged in operating passenger airline. The Company offers aviation, hospitality and travel related services. It operates through two geographic segments: Domestic, which includes air transportation within India, and International, which includes air transportation outside India. Its business lines include InterGlobe Air Transport, InterGlobe Aviation, InterGlobe Hotels, InterGlobe Technologies, InterGlobe Technology Quotient and InterGlobe Education. InterGlobe Technologies provides integrated information technology and business process outsourcing services. InterGlobe Technology Quotient distributes Travelport in India and Sri Lanka. It has four trademarks, namely, IndiGo Airways, IndiGo Airlines, IndiGo and IndiGo Air. It has around 96 aircrafts, and operates scheduled services to approximately 33 airports in India, with a maximum of around 593 domestic flights per day.
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