Report
Alex Boulougouris, CFA ...
  • Jakub Caithaml

Wizz Air: investing in the future (stays BUY)

After the war in Ukraine started, we reiterated our BUY call on Wizz Air (WIZZ). We severely underestimated the impact that high fuel prices and the deterioration of the macro outlook would have on the sentiment surrounding the stock. Operationally, we saw a risk of WIZZ being unable to ramp up its staff to >6k in time, ahead of the summer. While WIZZ has delivered, airports and ATC are facing staff shortages, causing delays. Combined with the unfortunately-timed decision to discontinue fuel hedging, we may be looking at another loss-making year at WIZZ. That said, we believe the share price is not reflecting the long-term potential of the company. The investments into modern aircraft and the network should, eventually, translate into profitability. In the 5Y prior to the pandemic, WIZZ was trading at an EV of around EUR 150-200 per pax. Looking ahead, the current EV implies around EUR 50-100 per pax. Historically, there has been a strong link between profitability and number of passengers. In the same period, both Ryanair (RYA) and WIZZ were generating around EUR 9/pax profit, on average. By the summer of 2023E, WIZZ could be operating c.60-70% more capacity compared to the pre-pandemic levels, we believe. Given the unit cost leadership enabled by the most modern fleet in Europe, we believe the link between the number of passengers and profits is likely to be restored, eventually. If this happens, we believe the share price should follow the earnings. We believe WIZZ offers great value at current levels, and we reiterate our – admittedly poorly timed – BUY call on the stock. We set our new 12M price target (PT) at GBP 38, making minor adjustments to our forecast.
Underlying
Wizz Air Holdings Plc

Wizz Air Holding is a European airline. As of Mar 31 2017, Co. provided more than 500 routes from 28 bases, connecting 141 destinations across 42 countries. Co. has two reportable segments: the airline and the tour operator business units, marketed under the Wizz Air and Wizz Tours brand names, respectively. Wizz Air sells flight tickets and related services to external customers and, to an extent, to Wizz Tours. Wizz Tours sells travel packages to external customers covering the network of Wizz Air.

Provider
Wood and Company
Wood and Company

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.

Analysts
Alex Boulougouris, CFA

Jakub Caithaml

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