MOSL: INTERGLOBE AVIATION (Neutral)- Operationally above estimate-deviation in core strategy
​InterGlobe Aviation: Operationally above estimate; deviation in core strategy
(INDIGO IN, Mkt Cap USD6.2b, CMP INR1141, TP INR1234, 8% Upside, Neutral)
- IndiGo reported revenue of INR48.5b (est. of INR49.5b; +19% YoY, -3% QoQ) and EBITDAR of INR13.3b (est. of INR10.8b; -11% YoY, -8% QoQ). This was primarily led by higher-than-expected yield of INR3.99 (est. of INR3.88; -6% YoY, flat QoQ) in a seasonally lean 4Q. IndiGo has announced its foray into regional markets. Also, mgmt. has raised its fleet guidance for FY18 to 170 from 154.
- -Operating performance above estimate: Higher-than-expected yield in a seasonally lean 4Q and lower fuel cost resulted in a better operating performance during the quarter. EBITDAR margin stood at 27.5% in 4QFY17 v/s 36.8% in 4QFY16 and 28.9% in 3QFY17.
- -PAT boosted by higher OI: PAT increased to INR4.4b, mainly as other income grew to INR2.9b (est. of INR1.6b; +87% YoY, +71% QoQ) led by higher interest income and a reversal of forex gain of INR826m.
- -Foraying into regional markets: IndiGo has placed an order for 50 ATR 72-600 aircraft (plans ATR operation at end-2017). The company also expects to induct up to 7 ATR aircraft by March 2018 and 20 ATR aircraft by December 2018. We note that this is a deviation from its core strategy of having a single fleet of A320s. We are not building any ATRs in our model, and would like to wait for a few quarters before more clarity emerges.
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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