ICICI Securities Limited Kingfisher Airlines (DECAVI)
ICICI Securities Limited Result Update February 16, 2011 Rating matrix Rating
:
Add
Target
:
| 49
Kingfisher Airlines (DECAVI)
Target Period
:
9-12 months
Potential Upside
:
9%
PRICE TARGET ..................................................................................... Changed to | 49
Annual Performance (| Crore) |. Cr Revenues EBITDA Net Profit
FY09 5,239 (1,807) (2,152)
FY10 5,068 (900) (1,647)
FY11E 6,321 (296) (847)
FY12E 7,605 (155) (690)
FY09 NA NA
FY10 NA NA
FY11E NA NA
FY12E NA NA
Valuation summary PE (x) Target PE (x) EV to Sales (x)
1.9
2.0
1.6
1.3
EV to EBITDA (x)
NA
NA
NM
NA
RoNW (%)
NA
NA
NA
NA
RoCE (%)
NA
NA
4.2
9.0
Stock data Market Capitalisation
| 1,197 crore
Debt
| 7,414 crore
Cash
| crore
EV
| crore
52 week H/L
91/39
Equity capital
| crore
Face value
| 10
DII Holding (%)
4.6
FII Holding (%)
5.9
Price movement 6,500
90
6,000
80 70
5,500
60
5,000
50
4,500
40
KFA (LHS)
27/01/2011
14/12/2010
11/01/2010
20/09/2010
08/06/2010
25/06/2010
4,000 14/05/2010
30 31/03/2010
EPS (FY11E) .............................................................................................................. NA EPS (FY12E) ............................................................................................................... NA RATING .................................................................................. Changed to Add from Buy
Rising yields drive growth... In Q3FY11, Kingfisher Airlines (KFA) reported consolidated revenues of |1,658.7 crore (up 28.1% YoY, 20.0% QoQ), which remained more or less in line with our expectations (I-direct estimate: |1,690.1 crore). The growth in revenue was mainly driven by strong growth in yield per ASKM (domestic yields up 16.2% YoY, international yields up 40.7% YoY) on robust demand despite a decline in the domestic market share led by a reduction in the total number of flights. It declined 5.8% YoY to 30,883 (domestic, international) due to unplanned grounding of Airbus aircraft. At the PAT level, KFA reported a net loss of |253.9 crore (Idirect estimate: |168.5 crore). It remained lower due to higher interest and depreciation costs. Revenue grows over 28% on strong growth in yields KFA’s domestic revenues grew 11% YoY to |1,261 crore despite a 9.8% reduction in total number of flights. The growth in this segment mainly came in from a rise in yields per ASKM (up 16.1% YoY) on robust demand for air travel. Also, the international segment that contributes nearly 24% of total revenues reported robust revenue growth of 165.3% led by 93% increase in total no of flights and 40.7% YoY rise in pax yield. Bottomline improves but still remains in negative zone Despite an improved operating performance, KFA reported a net loss of | 253.9 crore for the quarter on account of higher interest outflow for the quarter.
Valuations
100
15/02/2010
| 45
WHAT’S CHANGED…
NIFTY (RHS)
Analyst’s name Rashesh Shah [email protected]
At the CMP of | 45, the stock is trading at 1.5x and 1.25x its FY11E and FY12E EV/sales, respectively. The lower than expected financial performance on account of high debt remains a concern for the company in the rising interest rates and fuel cost scenario. However, with the return of grounded aircraft and a strong domestic outlook, we also expect KFA to improve its revenue and market share by 20% and ~1.5% in FY12E. We have assigned an ADD rating to the stock with a target price of | 49 i.e. at 1.3x FY12E EV/sales. Exhibit 1: Key Financials (| crore) |. crore Revenues EBITDA EBITDA (%) Depreciation Interest Net Profit Diluted EPS (|)
Q3FY11 1658.7 73.8 4.5 61.3 339.6 -253.9 -9.5
Q3FY11E 1690.1 3.3 0.2 55.2 310.1 -168.5 -6.3
Source: Company, ICICIdirect.com Research
ICICIdirect.com | Equity Research
Q3FY10 1295.3 -123.3 -9.5 53.8 274.7 -419.9 -15.8
Q2FY11 1382.7 -78.5 -5.7 53.0 362.3 -230.8 -8.7
YoY Gr (%) 28.1 -159.9 LP 13.9 23.6 NA NA
QoQ Gr (%) 20.0 PL LP 15.6 -6.3 NA NA
ICICI Securities Limited Exhibit 2: Trend in domestic market share 25.0
160.0 travelled through KFA grew by only 8% leading to a decline in market share from 21.2% to 18.9%
120.0
23.0
100.0
21.2
23.0 21.1
21.0
80.0
%
140.0
In lacs
Overall pax traffic grew 21% YoY against which pax
19.6
60.0
19.0
18.9
40.0
17.0
20.0
15.0
Q3FY10
Q4FY10
Q1FY11
Pax travelled (In lacs) - L
Q2FY11
KFA's share - L
Q3FY11 Market Share (%) - R
Source: Company, ICICIdirect.com Research
Domestic flights
ASKM ('mn)
RPKM ('mn)
Source: Company, ICICIdirect.com Research
Q3FY11
2487
2,472 Q2FY11
2,229
ASKM ('mn)
1425 1058
1406 1098
Q2FY11
Q3FY11
1316 1007 Q1FY11
Q4FY10
Q3FY10
0
780 563
500
792 559
2618 2265
1000 2332 1909
2818 2288
1500
Q3FY11
77% on account of a rise in the no of flights. RPKM also showed healthy growth of 96.4% YoY
2000
Q2FY11
International ASKM continued to report robust growth of
3500 3000 2500 2000 1500 1000 500 0
Q1FY11
by 7.7% YoY
Exhibit 6: International demand supply matrix
Q4FY10
strong demand growth, RPKM for the quarter increased
Exhibit 5: Domestic demand supply matrix
2950 2185
utilisation of existing fleets. On the other hand, with
Source: Company, ICICIdirect.com Research
2776 2103
declined only by 5.7% on account of an increase in
International flights
Source: Company, ICICIdirect.com Research
Q3FY10
Despite a 9.8% decline in no of flights, domestic ASKM
Q1FY11
28396 Q3FY11
1,268
27,805 Q2FY11
-
over 93% in international flights to cater to the rising demand in this segment
3,000 2,500 2,000 1,500 1,000 500 -
Q4FY10
31,491 Q1FY11
7,000 On the other hand, there has been a sharp increase of
nos
32,670
14,000
Q4FY10
21,000
pax growth of over 21% YoY
31,488
28,000
carried by KFA increased by only 8% as against industry
nos
On account of 9.8% YoY decline in the no of flights, pax
Q3FY10
35,000
1,288
Exhibit 4: International flights trend
Q3FY10
Exhibit 3: Domestic flights trend
RPKM ('mn)
Source: Company, ICICIdirect.com Research
During the quarter, KFA’s domestic pax-traffic increased by only 8% YoY as against industry pax traffic growth of 21% YoY. This was mainly due to due to a reduction in total no of domestic flights on account of unplanned grounding of a few Airbus aircraft and shifting of some of the flights towards international routes. On the other hand, international pax traffic witnessed an impressive growth of 96.4% YoY led by a 93% increase in the number of flights to cater to the strong demand growth in this segment. The international division of the airline has benefited from higher utilisation of fleets, improving code-sharing agreements and focused customer services.
ICICIdirect.com | Equity Research
Page 2
ICICI Securities Limited Exhibit 7: Trend in average load factors 90
75 70 65
Domestic
11/30/2010
10/31/2010
9/30/2010
8/31/2010
7/31/2010
6/30/2010
5/31/2010
4/30/2010
3/31/2010
2/28/2010
1/31/2010
12/31/2009
9/30/2009
8/31/2009
7/31/2009
11/30/2009
62.1
60
10/31/2009
%
84.8
83.2
80
as compared to 75.7% last year. The international load factor also remained higher at 78% as compared to 70.6% in Q3FY10
85.9 87.1 86.785.9 79.3 80.9 80.2 80.1 79.2 79.3 76.4 75.9 76.9 73.4 75.8 75.9 75.7 75.3 75.2 73.7 71.2 73.4 70.1 74.4 73.5 74.4 72 69.1 70.8 70.1 70.4 70.1 67
85
KFA’s domestic load factor jumped to 86.6% in Q3FY11
International
Source: Company, ICICIdirect.com Research
Exhibit 8: Revenue per available seat kilometres (ASKM) (In |.) 6 4.89
5 KFA’s yields grew impressively in Q3FY11. Domestic yields grew 16.2% YoY while international yields increased by over 40.7% YoY on strong demand and limited supply of aircraft in the industry
4.21
4 2.83
3
2.01
2 1 0 Q3FY10
Q3FY11
Domestic
International
Source: Company, ICICIdirect.com Research
Exhibit 9: Trend in domestic ATF prices in key metro cities in India (in |)
Delhi
Kolkata
Mumbai
12/1/10
10/1/10
8/1/10
6/1/10
4/1/10
2/1/10
12/1/09
10/1/09
8/1/09
6/1/09
4/1/09
2/1/09
12/1/08
10/1/08
8/1/08
that remains a concern for the industry. Prices have increased ~10.9% YoY and ~5.1%. QoQ
Rs. per kl litre
ATF prices in India have started showing a rising trend
90000 80000 70000 60000 50000 40000 30000 20000 10000 0
Chennai
Source: Company, ICICIdirect.com Research
ICICIdirect.com | Equity Research
Page 3
ICICI Securities Limited Segment wise performance
During the quarter, KFA reported a domestic EBITDAR margin of 21.9% vs. 17.8% in the same quarter of the previous year. The international EBITDAR margin also improved to 14.8% in Q3FY11 vs. -20.7% in Q3FY10. The airline reported an improvement in operational performance supported by high load factor, optimum utilisation of its fleet and continued focus on the profitable route network. The details of Kingfisher’s segment wise financial performance are as follows: Exhibit 10: Standalone financial summary – Domestic vs. international Particulars
Domestic Q3FY11
Q3FY10
YoY Gr (%)
1261
1136
11.0
398
150
165.3
EBITDAR
276
202
NA
59
-31
LP
EBITDAR (%)
21.9
17.8
411 bps
14.8
-20.7
LP
94
-3
LP
-3
-89
NA
-0.3
LP
-0.8
-59.3
NA
Operating Revenues
EBITDA
Q3FY11
International
Q3FY10 YoY Gr (%)
EBITDA (%) 7.5 Source: Company, ICICIdirect.com Research
Debt recast plans
During the quarter, the company has executed a part of the master debt re-cast plan, which is as follows.
ICICIdirect.com | Equity Research
•
Converted | 750.1 crore and | 553.1 crore of loans into 7.5% preference shares and 8% cumulative redeemable preference shares, respectively
•
Interest rates on loans also fell by 300 bps
•
Additional fund based loan facilities of | 768 crore and non-fund based facilities of | 444.4 crore was sanctioned by the banks
•
Converted a part of the working capital limits of | 297 crore into working capital loans
Page 4
ICICI Securities Limited ICICIdirect.com coverage universe Jet Airways Idirect Code Mcap (|.Cr)
JETAIR 4,101
CMP (|)
475
Sales (| Cr) 13077.9 11876.4
FY09 FY10
MODLUF
Mcap (|.Cr)
2,473
DECAVI
Mcap (|.Cr) 2,021 *EV/E = EV/EBITDA
PE (x) NA NA
*EV/E (x) -19.1 14.8
RoNW (%) -30.3 -21.4
RoCE (%) -10.0 0.5
520
FY11E
14191.0
19.5
43.9
10.8
8.2
21.0
7.2
Upside (%)
9.5%
FY12E
16297.0
14.8
113.5
4.2
5.0
38.9
10.1
49 69 40.8%
FY09 FY10 FY11E FY12E
Sales (| Cr) 1689.4 2181.0 2971.1 3439.9
Sales Gr. (%) 30.5 29.1 36.2 15.8
EPS (|) -13.8 2.7 5.5 5.2
PE (x) NA 18.1 8.9 9.4
*EV/E (x) -4.7 46.8 8.1 6.4
RoNW (%) NA NA 126.8 91.5
RoCE (%) NA 62.6 59.6 46.1
45 49 8.9%
FY09 FY10 FY11E FY12E
Sales (| Cr) 5239.0 5067.8 6722.8 8229.0
Sales Gr. (%) NA -3.3 32.7 22.4
EPS (|) -80.9 -62.0 -18.6 -0.2
PE (x) NA NA NA NA
*EV/E (x) -5.5 -11.1 94.8 20.2
RoNW (%) NA NA NA NA
RoCE (%) NA NA 4.2 9.0
CMP (|) Target (|) Upside (%)
Kingfisher Idirect Code
EPS (|) -111.4 -48.7
Target (|)
Spicejet Idirect Code
Sales Gr. (%) 27.0 -9.2
CMP (|) Target (|) Upside (%)
Exhibit 11: Recommendation History 100 90 80 70 60 50 40 30
BUY, TP 87 REDUCE, TP 52
27/01/2011
14/12/2010
11/01/2010
20/09/2010
08/06/2010
25/06/2010
14/05/2010
31/03/2010
15/02/2010
ADD, TP 71
KFA (LHS) Source: Company, ICICIdirect.com Research
ICICIdirect.com | Equity Research
Page 5
ICICI Securities Limited RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Add, Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: 20% or more; Buy: Between 10% and 20%; Add: Up to 10%; Reduce: Up to -10% Sell: -10% or more; Pankaj Pandey
Head – Research
[email protected]
ICICIdirect.com Research Desk, ICICI Securities Limited, 7th Floor, Akruti Centre Point, MIDC Main Road, Marol Naka, Andheri (East) Mumbai – 400 093 [email protected] ANALYST CERTIFICATION We /I, Rashesh Shah, CA analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our personal views about any and all of the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Analysts aren't registered as research analysts by FINRA and might not be an associated person of the ICICI Securities Inc.
Disclosures: ICICI Securities Limited (ICICI Securities) and its affiliates are a full-service, integrated investment banking, investment management and brokerage and financing group. We along with affiliates are leading underwriter of securities and participate in virtually all securities trading markets in India. We and our affiliates have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. Our research professionals provide important input into our investment banking and other business selection processes. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their dependent family members from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on reasonable basis, ICICI Securities, its subsidiaries and associated companies, their directors and employees (“ICICI Securities and affiliates”) are under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities is acting in an advisory capacity to this company, or in certain other circumstances. This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return of investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities and affiliates accept no liabilities for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice. ICICI Securities and its affiliates might have managed or co-managed a public offering for the subject company in the preceding twelve months. ICICI Securities and affiliates might have received compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of public offerings, corporate finance, investment banking or other advisory services in a merger or specific transaction. ICICI Securities and affiliates expect to receive compensation from the companies mentioned in the report within a period of three months following the date of publication of the research report for services in respect of public offerings, corporate finance, investment banking or other advisory services in a merger or specific transaction. It is confirmed that Rashesh Shah, CA research analysts and the authors of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months. Our research professionals are paid in part based on the profitability of ICICI Securities, which include earnings from Investment Banking and other business. ICICI Securities or its subsidiaries collectively do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report. It is confirmed that Rashesh Shah CA research analysts and the authors of this report or any of their family members does not serve as an officer, director or advisory board member of the companies mentioned in the report. ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. ICICI Securities and affiliates may act upon or make use of information contained in the report prior to the publication thereof. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.
ICICIdirect.com | Equity Research
Page 6
:
Add
Target
:
| 49
Kingfisher Airlines (DECAVI)
Target Period
:
9-12 months
Potential Upside
:
9%
PRICE TARGET ..................................................................................... Changed to | 49
Annual Performance (| Crore) |. Cr Revenues EBITDA Net Profit
FY09 5,239 (1,807) (2,152)
FY10 5,068 (900) (1,647)
FY11E 6,321 (296) (847)
FY12E 7,605 (155) (690)
FY09 NA NA
FY10 NA NA
FY11E NA NA
FY12E NA NA
Valuation summary PE (x) Target PE (x) EV to Sales (x)
1.9
2.0
1.6
1.3
EV to EBITDA (x)
NA
NA
NM
NA
RoNW (%)
NA
NA
NA
NA
RoCE (%)
NA
NA
4.2
9.0
Stock data Market Capitalisation
| 1,197 crore
Debt
| 7,414 crore
Cash
| crore
EV
| crore
52 week H/L
91/39
Equity capital
| crore
Face value
| 10
DII Holding (%)
4.6
FII Holding (%)
5.9
Price movement 6,500
90
6,000
80 70
5,500
60
5,000
50
4,500
40
KFA (LHS)
27/01/2011
14/12/2010
11/01/2010
20/09/2010
08/06/2010
25/06/2010
4,000 14/05/2010
30 31/03/2010
EPS (FY11E) .............................................................................................................. NA EPS (FY12E) ............................................................................................................... NA RATING .................................................................................. Changed to Add from Buy
Rising yields drive growth... In Q3FY11, Kingfisher Airlines (KFA) reported consolidated revenues of |1,658.7 crore (up 28.1% YoY, 20.0% QoQ), which remained more or less in line with our expectations (I-direct estimate: |1,690.1 crore). The growth in revenue was mainly driven by strong growth in yield per ASKM (domestic yields up 16.2% YoY, international yields up 40.7% YoY) on robust demand despite a decline in the domestic market share led by a reduction in the total number of flights. It declined 5.8% YoY to 30,883 (domestic, international) due to unplanned grounding of Airbus aircraft. At the PAT level, KFA reported a net loss of |253.9 crore (Idirect estimate: |168.5 crore). It remained lower due to higher interest and depreciation costs. Revenue grows over 28% on strong growth in yields KFA’s domestic revenues grew 11% YoY to |1,261 crore despite a 9.8% reduction in total number of flights. The growth in this segment mainly came in from a rise in yields per ASKM (up 16.1% YoY) on robust demand for air travel. Also, the international segment that contributes nearly 24% of total revenues reported robust revenue growth of 165.3% led by 93% increase in total no of flights and 40.7% YoY rise in pax yield. Bottomline improves but still remains in negative zone Despite an improved operating performance, KFA reported a net loss of | 253.9 crore for the quarter on account of higher interest outflow for the quarter.
Valuations
100
15/02/2010
| 45
WHAT’S CHANGED…
NIFTY (RHS)
Analyst’s name Rashesh Shah [email protected]
At the CMP of | 45, the stock is trading at 1.5x and 1.25x its FY11E and FY12E EV/sales, respectively. The lower than expected financial performance on account of high debt remains a concern for the company in the rising interest rates and fuel cost scenario. However, with the return of grounded aircraft and a strong domestic outlook, we also expect KFA to improve its revenue and market share by 20% and ~1.5% in FY12E. We have assigned an ADD rating to the stock with a target price of | 49 i.e. at 1.3x FY12E EV/sales. Exhibit 1: Key Financials (| crore) |. crore Revenues EBITDA EBITDA (%) Depreciation Interest Net Profit Diluted EPS (|)
Q3FY11 1658.7 73.8 4.5 61.3 339.6 -253.9 -9.5
Q3FY11E 1690.1 3.3 0.2 55.2 310.1 -168.5 -6.3
Source: Company, ICICIdirect.com Research
ICICIdirect.com | Equity Research
Q3FY10 1295.3 -123.3 -9.5 53.8 274.7 -419.9 -15.8
Q2FY11 1382.7 -78.5 -5.7 53.0 362.3 -230.8 -8.7
YoY Gr (%) 28.1 -159.9 LP 13.9 23.6 NA NA
QoQ Gr (%) 20.0 PL LP 15.6 -6.3 NA NA
ICICI Securities Limited Exhibit 2: Trend in domestic market share 25.0
160.0 travelled through KFA grew by only 8% leading to a decline in market share from 21.2% to 18.9%
120.0
23.0
100.0
21.2
23.0 21.1
21.0
80.0
%
140.0
In lacs
Overall pax traffic grew 21% YoY against which pax
19.6
60.0
19.0
18.9
40.0
17.0
20.0
15.0
Q3FY10
Q4FY10
Q1FY11
Pax travelled (In lacs) - L
Q2FY11
KFA's share - L
Q3FY11 Market Share (%) - R
Source: Company, ICICIdirect.com Research
Domestic flights
ASKM ('mn)
RPKM ('mn)
Source: Company, ICICIdirect.com Research
Q3FY11
2487
2,472 Q2FY11
2,229
ASKM ('mn)
1425 1058
1406 1098
Q2FY11
Q3FY11
1316 1007 Q1FY11
Q4FY10
Q3FY10
0
780 563
500
792 559
2618 2265
1000 2332 1909
2818 2288
1500
Q3FY11
77% on account of a rise in the no of flights. RPKM also showed healthy growth of 96.4% YoY
2000
Q2FY11
International ASKM continued to report robust growth of
3500 3000 2500 2000 1500 1000 500 0
Q1FY11
by 7.7% YoY
Exhibit 6: International demand supply matrix
Q4FY10
strong demand growth, RPKM for the quarter increased
Exhibit 5: Domestic demand supply matrix
2950 2185
utilisation of existing fleets. On the other hand, with
Source: Company, ICICIdirect.com Research
2776 2103
declined only by 5.7% on account of an increase in
International flights
Source: Company, ICICIdirect.com Research
Q3FY10
Despite a 9.8% decline in no of flights, domestic ASKM
Q1FY11
28396 Q3FY11
1,268
27,805 Q2FY11
-
over 93% in international flights to cater to the rising demand in this segment
3,000 2,500 2,000 1,500 1,000 500 -
Q4FY10
31,491 Q1FY11
7,000 On the other hand, there has been a sharp increase of
nos
32,670
14,000
Q4FY10
21,000
pax growth of over 21% YoY
31,488
28,000
carried by KFA increased by only 8% as against industry
nos
On account of 9.8% YoY decline in the no of flights, pax
Q3FY10
35,000
1,288
Exhibit 4: International flights trend
Q3FY10
Exhibit 3: Domestic flights trend
RPKM ('mn)
Source: Company, ICICIdirect.com Research
During the quarter, KFA’s domestic pax-traffic increased by only 8% YoY as against industry pax traffic growth of 21% YoY. This was mainly due to due to a reduction in total no of domestic flights on account of unplanned grounding of a few Airbus aircraft and shifting of some of the flights towards international routes. On the other hand, international pax traffic witnessed an impressive growth of 96.4% YoY led by a 93% increase in the number of flights to cater to the strong demand growth in this segment. The international division of the airline has benefited from higher utilisation of fleets, improving code-sharing agreements and focused customer services.
ICICIdirect.com | Equity Research
Page 2
ICICI Securities Limited Exhibit 7: Trend in average load factors 90
75 70 65
Domestic
11/30/2010
10/31/2010
9/30/2010
8/31/2010
7/31/2010
6/30/2010
5/31/2010
4/30/2010
3/31/2010
2/28/2010
1/31/2010
12/31/2009
9/30/2009
8/31/2009
7/31/2009
11/30/2009
62.1
60
10/31/2009
%
84.8
83.2
80
as compared to 75.7% last year. The international load factor also remained higher at 78% as compared to 70.6% in Q3FY10
85.9 87.1 86.785.9 79.3 80.9 80.2 80.1 79.2 79.3 76.4 75.9 76.9 73.4 75.8 75.9 75.7 75.3 75.2 73.7 71.2 73.4 70.1 74.4 73.5 74.4 72 69.1 70.8 70.1 70.4 70.1 67
85
KFA’s domestic load factor jumped to 86.6% in Q3FY11
International
Source: Company, ICICIdirect.com Research
Exhibit 8: Revenue per available seat kilometres (ASKM) (In |.) 6 4.89
5 KFA’s yields grew impressively in Q3FY11. Domestic yields grew 16.2% YoY while international yields increased by over 40.7% YoY on strong demand and limited supply of aircraft in the industry
4.21
4 2.83
3
2.01
2 1 0 Q3FY10
Q3FY11
Domestic
International
Source: Company, ICICIdirect.com Research
Exhibit 9: Trend in domestic ATF prices in key metro cities in India (in |)
Delhi
Kolkata
Mumbai
12/1/10
10/1/10
8/1/10
6/1/10
4/1/10
2/1/10
12/1/09
10/1/09
8/1/09
6/1/09
4/1/09
2/1/09
12/1/08
10/1/08
8/1/08
that remains a concern for the industry. Prices have increased ~10.9% YoY and ~5.1%. QoQ
Rs. per kl litre
ATF prices in India have started showing a rising trend
90000 80000 70000 60000 50000 40000 30000 20000 10000 0
Chennai
Source: Company, ICICIdirect.com Research
ICICIdirect.com | Equity Research
Page 3
ICICI Securities Limited Segment wise performance
During the quarter, KFA reported a domestic EBITDAR margin of 21.9% vs. 17.8% in the same quarter of the previous year. The international EBITDAR margin also improved to 14.8% in Q3FY11 vs. -20.7% in Q3FY10. The airline reported an improvement in operational performance supported by high load factor, optimum utilisation of its fleet and continued focus on the profitable route network. The details of Kingfisher’s segment wise financial performance are as follows: Exhibit 10: Standalone financial summary – Domestic vs. international Particulars
Domestic Q3FY11
Q3FY10
YoY Gr (%)
1261
1136
11.0
398
150
165.3
EBITDAR
276
202
NA
59
-31
LP
EBITDAR (%)
21.9
17.8
411 bps
14.8
-20.7
LP
94
-3
LP
-3
-89
NA
-0.3
LP
-0.8
-59.3
NA
Operating Revenues
EBITDA
Q3FY11
International
Q3FY10 YoY Gr (%)
EBITDA (%) 7.5 Source: Company, ICICIdirect.com Research
Debt recast plans
During the quarter, the company has executed a part of the master debt re-cast plan, which is as follows.
ICICIdirect.com | Equity Research
•
Converted | 750.1 crore and | 553.1 crore of loans into 7.5% preference shares and 8% cumulative redeemable preference shares, respectively
•
Interest rates on loans also fell by 300 bps
•
Additional fund based loan facilities of | 768 crore and non-fund based facilities of | 444.4 crore was sanctioned by the banks
•
Converted a part of the working capital limits of | 297 crore into working capital loans
Page 4
ICICI Securities Limited ICICIdirect.com coverage universe Jet Airways Idirect Code Mcap (|.Cr)
JETAIR 4,101
CMP (|)
475
Sales (| Cr) 13077.9 11876.4
FY09 FY10
MODLUF
Mcap (|.Cr)
2,473
DECAVI
Mcap (|.Cr) 2,021 *EV/E = EV/EBITDA
PE (x) NA NA
*EV/E (x) -19.1 14.8
RoNW (%) -30.3 -21.4
RoCE (%) -10.0 0.5
520
FY11E
14191.0
19.5
43.9
10.8
8.2
21.0
7.2
Upside (%)
9.5%
FY12E
16297.0
14.8
113.5
4.2
5.0
38.9
10.1
49 69 40.8%
FY09 FY10 FY11E FY12E
Sales (| Cr) 1689.4 2181.0 2971.1 3439.9
Sales Gr. (%) 30.5 29.1 36.2 15.8
EPS (|) -13.8 2.7 5.5 5.2
PE (x) NA 18.1 8.9 9.4
*EV/E (x) -4.7 46.8 8.1 6.4
RoNW (%) NA NA 126.8 91.5
RoCE (%) NA 62.6 59.6 46.1
45 49 8.9%
FY09 FY10 FY11E FY12E
Sales (| Cr) 5239.0 5067.8 6722.8 8229.0
Sales Gr. (%) NA -3.3 32.7 22.4
EPS (|) -80.9 -62.0 -18.6 -0.2
PE (x) NA NA NA NA
*EV/E (x) -5.5 -11.1 94.8 20.2
RoNW (%) NA NA NA NA
RoCE (%) NA NA 4.2 9.0
CMP (|) Target (|) Upside (%)
Kingfisher Idirect Code
EPS (|) -111.4 -48.7
Target (|)
Spicejet Idirect Code
Sales Gr. (%) 27.0 -9.2
CMP (|) Target (|) Upside (%)
Exhibit 11: Recommendation History 100 90 80 70 60 50 40 30
BUY, TP 87 REDUCE, TP 52
27/01/2011
14/12/2010
11/01/2010
20/09/2010
08/06/2010
25/06/2010
14/05/2010
31/03/2010
15/02/2010
ADD, TP 71
KFA (LHS) Source: Company, ICICIdirect.com Research
ICICIdirect.com | Equity Research
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ICICI Securities Limited RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Add, Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: 20% or more; Buy: Between 10% and 20%; Add: Up to 10%; Reduce: Up to -10% Sell: -10% or more; Pankaj Pandey
Head – Research
[email protected]
ICICIdirect.com Research Desk, ICICI Securities Limited, 7th Floor, Akruti Centre Point, MIDC Main Road, Marol Naka, Andheri (East) Mumbai – 400 093 [email protected] ANALYST CERTIFICATION We /I, Rashesh Shah, CA analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our personal views about any and all of the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Analysts aren't registered as research analysts by FINRA and might not be an associated person of the ICICI Securities Inc.
Disclosures: ICICI Securities Limited (ICICI Securities) and its affiliates are a full-service, integrated investment banking, investment management and brokerage and financing group. We along with affiliates are leading underwriter of securities and participate in virtually all securities trading markets in India. We and our affiliates have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. Our research professionals provide important input into our investment banking and other business selection processes. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their dependent family members from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on reasonable basis, ICICI Securities, its subsidiaries and associated companies, their directors and employees (“ICICI Securities and affiliates”) are under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities is acting in an advisory capacity to this company, or in certain other circumstances. This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return of investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities and affiliates accept no liabilities for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice. ICICI Securities and its affiliates might have managed or co-managed a public offering for the subject company in the preceding twelve months. ICICI Securities and affiliates might have received compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of public offerings, corporate finance, investment banking or other advisory services in a merger or specific transaction. ICICI Securities and affiliates expect to receive compensation from the companies mentioned in the report within a period of three months following the date of publication of the research report for services in respect of public offerings, corporate finance, investment banking or other advisory services in a merger or specific transaction. It is confirmed that Rashesh Shah, CA research analysts and the authors of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months. Our research professionals are paid in part based on the profitability of ICICI Securities, which include earnings from Investment Banking and other business. ICICI Securities or its subsidiaries collectively do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report. It is confirmed that Rashesh Shah CA research analysts and the authors of this report or any of their family members does not serve as an officer, director or advisory board member of the companies mentioned in the report. ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. ICICI Securities and affiliates may act upon or make use of information contained in the report prior to the publication thereof. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.
ICICIdirect.com | Equity Research
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