Pegasus Airlines: another good year (stays HOLD)
We have increased our 12M price target (PT) for Pegasus to TRY 248/share, while maintaining our HOLD rating. After two years of stellar margins, 2024E is shaping up to be another good year. We expect Pegasus to fly 13% more ASK, while keeping its RASK flat yoy (lower fares offset by a higher load factor). Pegasus remains one of the lowest unit cost producers globally. Its efficiency is underpinned by its modern neo fleet, which is not affected by the P&W GTF engine issue – an important competitive advantage currently. In 2024E, we expect the ex-fuel CASK to increase by 7% yoy. Despite this, Pegasus should still generate a c.29% EBITDA margin (EBITDA of EUR 880m) in 2024E, we estimate. Although slightly lower than in the past 2Y (30-34%), this remains well above the pre-pandemic levels (a 23% EBITDAR margin over 2012-19, on average). We see Pegasus’ international RASK at c.15-20% above the pre-pandemic levels now. It is c.10-15% below Ryanair’s RASK, and c.5% above Wizz Air’s. Potential continued industry-wide pressure on fares is the key downside risk for both our forecasts and the consensus, in our view. Pegasus is trading at 6.4x EV/EBITDAR, broadly in line with its 5Y pre-pandemic average of 6.7x EV/EBITDAR. At the same time, many of its peers are trading at multiples well below their historical levels, reflecting the market’s cautious view on fares.Pegasus Hava Tasimaciligi is a low-cost airline group based in Turkey. Co. provides reasonably-priced transportation opportunities on point-to-point basis in short and medium range flight lines on its domestic and international network. Co. primarily provides transportation opportunities from its main hub in Istanbul Sabiha Gokcen International Airport, but also offers scheduled flights from other domestic hubs, primarily in Adana, Antalya and Izmir. Co.'s fleet is composed of 49 airplanes in total. Co.'s flight network consists of 76 locations (45 abroad and 31 domestic flight locations in 30 countries). Co. also provides cargo services and provides various training services.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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