Aviation stocks gain; IndiGo hits new high on strong Q4 results

Aviation

Shares of aviation companies were in focus with InterGlobe Aviation, the operator of IndiGo, hitting a new high of Rs 1,716, up 3 per cent, on the BSE in Tuesday’s early morning trade, after its quarterly profit surged five-fold in March quarter (Q4FY19).

SpiceJet’s stock, too, rallied 5 per cent to Rs 153, and was trading close to its record high of Rs 156, hit on December 20, 2017, in intra-day trade.

IndiGo posted a net profit of Rs 589 crore in Q4FY19, as the airline flew more passengers and clocked higher yields. The company had recorded a profit of Rs 118 crore in the year-ago quarter.

Revenue during the period grew nearly 36 per cent to Rs 7,883 crore from Rs 5,799 crore in the corresponding quarter of previous fiscal. EBITDAR (earnings before interest, taxes, depreciation, amortisation and rent /restructuring) margin improved to 27.8 per cent from 19.5 per cent in the same period last year.

However, for the entire financial year 2018-19, IndiGo’s reported a sharp 93 per cent year-on-year decline in net profit at Rs 156 crore, as compared to Rs 2,242 crore in 2017-18.

The management said the 2019 fiscal was a tough year for the airline industry in India because of high fuel prices, weak rupee and intense competitive environment. However, it is a tale of two halves for IndiGo, with the first half of the year incurring losses and the second half of the year experiencing a sharp recovery.

IndiGo and other low-cost airlines like SpiceJet have gained passengers in recent weeks after the grounding of Jet Airways. The board of directors of SpiceJet is scheduled to meet today to consider Q4FY19 results.

Analysts at Elara Capital changed the stock’s rating from ‘Buy’ to ‘Accumulate’ with a revised target price of Rs 1,927 from Rs 1,945 as the stock has run up by 49 per cent in past three months.

The brokerage firm reduced EPS for FY20E by 8 per cent and FY21E by 1 per cent on lower FY20 capacity growth at 30 per cent from 45 per cent as per guidance.

“As we enter a seasonally strong quarter amidst market tightness we expect Q1 of FY20 to start with record profitability. At current market price the stock trades at 8.8x FY21 EV/EBITDAR, which offers limited room for multiple expansion,” analysts at SBICAP Securities said in result update with ‘buy’ rating on the stock and target price of Rs 1,719.

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