MOSL: INTERGLOBE AVIATION (Neutral)-EBITDAR beat led by higher yields and lower fuel cost
​InterGlobe Aviation: EBITDAR beat led by higher yields and lower fuel cost
(INDIGO IN, Mkt Cap USD7.3b, CMP INR1244, TP INR1291, 4% Upside, Neutral)
- INDIGO reported revenue of INR53b (est. INR50b; +27% YoY, -8% QoQ) and EBITDAR of INR15.6b (est. INR12b; +61% YoY, -20% QoQ), led by higher-ticket yields of INR3.57 (est. INR3.35; +8.9% YoY) and lower fuel cost of INR16.8b (est. INR18b; +8% YoY). EBITDA stood at INR7.4b (est. INR3.3b), led by lower lease rentals of INR8.2b (est. INR8.6b, +6% YoY). PAT of INR5.5b (est. INR2.2b; +294% YoY) was further helped by higher other income of INR2.1b (est. INR1.8b; +33% YoY) and lower depreciation of INR1b (est. INR1.2b; -14% YoY). Management booked undisclosed compensation from P&W related to aircraft grounding and delivery delays in 2QFY18, positively impacting profitability.
- Ticket yields up 9% YoY: Better revenue management and lower capacity addition helped INDIGO's ticket yield (+9% YoY to INR3.57 v/s est. INR3.35). Total yield grew 10% YoY (-3.7% QoQ), led by (a) ancillary revenue (INR6.2b; +13% YoY, +6% QoQ) and (b) other operating income (INR1.4b; +720% YoY, 67% QoQ). Other operating income was likely higher due to compensation received from P&W.
- Surprised by lower fuel cost: While ATF price grew 2% YoY (-5% QoQ), INDIGO's fuel cost per ASK declined 4% YoY (-7% QoQ) in 2QFY18. We believe (a) increased ASK deployment in the international market (15% in 2QFY18 v/s 9% in 2QFY17 and 13% in 1QFY18) resulted in cheaper fuel procurement and (b) increased contribution of fuel-efficient A320Neo (~17% of fleet) resulted in fuel cost benefit for the airline.
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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