MOSL: INTERGLOBE AVIATION (Neutral)-EBITDAR above est. led by higher yields and lower fuel cost
​InterGlobe Aviation: EBITDAR above est. led by higher yields and lower fuel cost
(INDIGO IN, Mkt Cap USD6.2b, CMP INR1291, TP INR1312, 2% Upside, Neutral)
- IndiGo reported revenue of INR57.5b (in-line; +26% YoY, +19% QoQ) and EBITDAR of INR19.5b (est. of INR17.5b; +28% YoY, +46% QoQ), led by lower fuel cost of INR17.9b (est. of INR19.3b; +31% YoY, +1% QoQ). PAT of INR8.1b (est. of INR6.1b; +37% YoY, +84% QoQ) was further boosted by higher other income of INR2b (est. of INR1.5b; +25% YoY) and lower depreciation of INR983m (est. of INR1.4b; -14% YoY).
- EBITDAR above est.: 1QFY18 EBITDAR margin expanded to 34% from 33.4% in 1QFY17, led by higher yield of INR4.33 (est. of INR4.22; flat YoY, +9% QoQ) and lower fuel cost per ASK of INR1.19 (est. of INR1.25; +11% YoY, -5% QoQ).
- Surprised by lower fuel cost: While ATF price grew ~16% YoY, INDIGO's fuel cost per ASK rose 11% in 1QFY18, which management ascribed to increased contribution of fuel-efficient A320Neo (~16% of fleet) and better fuel procurement strategies.
- Lowered ASK addition guidance: Management has lowered its ASK addition guidance to 20% YoY from 25% earlier for FY18 (incl. planned ATR operation). For 2QFY18, ASKs are expected to increase 15% YoY. Management expects to increase capacity (ASKs) at the rate of 20% over FY18-20.
- Raising estimates: We raise our earnings estimate by ~10/2% for FY18/19 to factor in the revised ASK guidance. We believe lower capacity addition should result in better yields and higher load factor for INDIGO. Thus, for FY18/19E, we increase yield to INR4.21/4.35 (v/s INR4.14/4.3 earlier) and passenger load factor (PLF) to 87/88% (v/s 86% earlier).
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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