InterGlobe Aviation plunges to seven-month low on dismal earnings

By Vishal Sridhar

BENGALURU (Reuters) - Shares of InterGlobe Aviation Ltd plunged nearly 20 percent on Thursday to a seven-month low and wiped out 101.13 billion rupees ($1.52 billion) in market capitalisation after the owner of India's biggest carrier IndiGo reported dismal quarterly earnings.

InterGlobe reported a 73 percent slump in its fourth-quarter profit after market hours on Wednesday, hurt by a 33.5 percent surge in fuel costs, lower yields and foreign exchange losses.

The company is seeing yield pressures in the industry, InterGlobe said in an analyst call on Wednesday, adding that fares in the zero to 15-day booking window were "materially lower" than a year earlier.

"This is typically high-yielding traffic and consequently, our yields have been impacted more than expected and that is in spite of increasing fuel prices," Chief Financial Officer Rohit Philip said.

There have been some signs of yield improvements, but it is too early to say whether this will sustain over the quarter, added Philip.

Passenger yields, which gauge the average fare paid per mile per customer, dropped more than 5 percent, while revenue per available seat kilometre - a measure of operating earnings, fell over 3 percent.

Citi downgraded the stock to "sell" from "buy", citing the twin impacts of rising cost pressures and weak pricing power, while Morgan Stanley retained "equal-weight".

Quarterly yields were even weaker than what "we feared and that will be the key driver for earnings incrementally," Morgan Stanley said in a note, adding that yields would likely be flat in 2019 and rise 3 percent in 2020.

Citi cut its full-year 2019-20 EBITDAR (earnings before interest, tax, depreciation, amortisation and rent costs) estimates by 13 percent-17 percent to reflect a cut of 1 percent-2 percent in yield estimates, higher fuel costs and weaker rupee.

Citi cut its target price to 1,240 rupees from 1,600 rupees, while Morgan Stanley trimmed it to 1,205 rupees from 1,213 rupees.

Thirteen of the 18 brokerages covering InterGlobe rate it "buy" or higher, four "hold" and one "sell". Their median price target is 1,472.50 rupees, according to Thomson Reuters data.

InterGlobe shares plunged as much as 19.8 percent on Thursday, their sharpest since late January 2016, while rivals SpiceJet Ltd dropped up to 9 percent and Jet Airways (India) Ltd fell more than 11 percent.

($1 = 66.5600 Indian rupees)

(Reporting by Vishal Sridhar in Bengaluru, Additional reporting by Aditi Shah and Gaurav Dogra; Editing by Subhranshu Sahu)