Airline stocks fall on weak InterGlobe Aviation results; IndiGo tanks 18%

SpiceJet (down 9% at Rs 120) and Jet Airways (down 6% at Rs 556) were down more than 5% as compared to 0.16% decline in the S&P BSE Sensex at 09:55 am.

Shares of airline companies - InterGlobe Aviation (IndiGo), Jet Airways and SpiceJet – have tanked up to 18% after the IndiGo reported weak set of numbers for the quarter ended March 2018 (Q4FY18)

IndiGo plunged 18% to Rs 1,111 on the BSE after the company reported a sharp 73% decline in net profit to Rs 1.17 billion for the March quarter (Q4FY18), due to higher fuel costs and adverse forex exchange positions. The country’s largest airline had profit of Rs 4.4 billion in year ago quarter.

With today’s fall, the market value of IndiGo has declined 26% in past four trading sessions after the resignation of its president Aditya Ghosh.

SpiceJet (down 9% at Rs 120) and Jet Airways (down 6% at Rs 556) were down more than 5% on the BSE in intra-day trade today. On comparison, the S&P BSE Sensex was trading 0.16% lower at 35,122 points at 09:55 am.

IndiGo’s revenue from operations during the quarter under review grew 19.6% at Rs 57.99 billion against Rs 48.48 billion during the same period last year.

EBITDAR (earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs) margin declined to 19.5% in Q4FY18 from 29.9% in Q4FY17.

Elara Capital has reiterates ‘Buy’ rating on the stock and lower target price to Rs 1606 from Rs 1802 as brokerage firm lower FY20E EPS.

“We anticipate company will not aggressively increase airfares against rising fuel prices due to focus on growth, and subsequently reduce FY18E and FY19E EPS by 35% and 9%, respectively,” analysts said in quarterly update.

IndiGo’s Q4FY18 results is the sharp reversal in trend in the industry pricing scenario in Q4 after a healthy improvement in 9mFY18, according to analysts SBICAP Securities.

“The sharp reversal in pricing is clearly putting pressure on profitability amidst the sharp uptick in fuel prices. Factoring in higher crude prices (USD65/B) and pressure on yields (1% YoY increase) we have cut our FY19e/FY20e EPS by 23%/18% and arrive at a revised target price of Rs 1324 (Rs 1532 earlier) based on 9x FY20e EV/EBITDAR. We maintain BUY. However, improvement in the industry pricing scenario will be the key to near-term profitability and stock performance,” the brokerage firm said in result review.