-------- Forwarded Message --------
Subject: Jet Airways: Sustaining Above 550-600 Can Fly Up To 800-1050
Date: Mon, 8 Feb 2016 10:20:26 +0530
From: Asis Ghosh <asis...@gmail.com>
Reply-To: asis...@gmail.com
*Q3FY16 result surprised the street aided by lower fuel costs & higher ASKM*
*CMP: 570*
*
*
*Buy either above 550-585 or in dips around 515-505;*
*
*
*TGT1: 615-650-685*-730-770-800 (1-6M)*
*
*
*TGT2: 925-1000-1040*-1100 (12-24M)*
*
*
*TSL< 490*
Note: Consecutive closing below 490 zone, Jet may crash towards 470*-448
& 425-400 area in the alternative bear case scenario.
Q3FY16 PAT of Jet was reported at around Rs.468 cr against street
estimates of around Rs.334 cr (YOY-63.11 and QOQ-87.59 including
exceptional item); i.e a jump of nearly 640% and 435% on YOY & QOQ basis !!
Q3FY16 total revenue was at around Rs.5444 cr against Rs.5051 cr,
increased by 7.7% (YOY) and by 3.5% QOQ (Rs.5258 cr).
Q3 reported EPS was at 41.11 against consensus of 29.45 (YOY-5.56;
QOQ-7.71).
Interestingly, in all the last five quarters, there was an exceptional
item and total accumulated loss in Jet since FY:11-15 was around Rs.7193 cr.
If Jet posted comparable PAT as in Q3FY16 in the forthcoming quarters,
and with some expected growth, the company may wipe out all the previous
accumulated losses as indicated above by FY-19.
QOQ Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16
Exceptional Item 305.01 69.78 -1172.39 127.95 -45.56 ??
PAT 69.82 63.11 -1728.99 221.7 87.59 467
YOY FY-11 FY-12 FY-13 FY-14 FY-15 FY-16 (EXP) Accumulated
Loss(FY-16)
NET P/L(PAT) 9.69 -1236.1 -485.5 -3667.85 -1813.71
1292 -5901.47
ACCUMULATED LOSS -7193.47
(UP TO FY-15)
As par published P/L statement for Jet, there was no mention of any
exceptional item for Q3FY16 and it will be interesting to see, if any
such exceptional item helped for sudden jump in Q3 PAT !!
Q3FY16 EBITDA was at around Rs.693 cr against Rs.229 cr (YOY) with
margin stood around 12.7% Vs 4.5%.
Q3FY16 other operating income (leasing of aircraft & engine) was at
around Rs.420 cr against Rs.370 cr (YOY) and Rs.402 cr (QOQ).
Q3FY16 total expenses was at around Rs.4947 cr against Rs.5014 cr (YOY).
Notably. Jet's fuel expenses dropped by almost 27% to Rs.1235 cr against
Rs.1701 cr (YOY) and 8% QOQ (Rs.1337 cr).
Clearly, Q3 result of Jet was supported by lower fuel (ATF) cost, higher
traffic and increased aircraft utilization. Thus the growth in ASKM
(available seat per KM) helped Jet quite a lot in improving its
operating and financial performance in Q3. As par the management,
in-depth focus on cost reduction initiatives has resulted in around 5% &
15% lower cost in non-fuel and total ASKM.
Notably, OCT-Dec quarter (Q3) is traditionally strong/peak season for
airlines because of increased travel during festivals and year-end
holidays. Passenger revenue grew by 4.8% (YOY) for Jet in Q3.
In 2014-15, price of Brent crude oil fall by over 80%. In India, fuel
costs count for almost 50% of expenses of domestic airlines and a 4%
movement of fuel costs affects around 2% operating margin of the
airlines on either side.
However, crude is near its multiyear low around $27 and the short term
range may be around $25-36, considering various techno funda parameters;
i.e. crude may stabilize around $30 in the near term. Only by late
2016-17, we may see some re-balancing in demand/supply dynamics and in
that scenario, crude may hover around $45-50.
For domestic airlines, thus incremental benefit of lower fuel costs may
be at its peak and we may not see the Q3 like jumps (YOY-640% &
QOQ-435%) in earnings for domestic airlines including Jet in the months
ahead. Also, benefit of lower ATF prices may be passed on to the
consumers to a great extent by other domestic airlines to grab the
market share; i.e. we may see incrementally higher competition among the
airlines in India, which may affect operating margin in the days ahead.
As India is highly under penetrated in air travel compared to its peers,
there will be huge scope for growth in the months ahead, considering the
expected overall economic recovery, GDP growth, higher income
aspirations of the young demography, implementation of 7-PC etc. But,
higher regulatory charges, predatory ticket pricing for airline industry
in India may be some of the headwinds.
ATF prices in India is now at multi year low (35-41/- par lt) and much
below petrol price (around 60/- par lt), thanks to the Govt for not
increasing any ED on ATF for developing infra purpose !! This is a huge
boost for domestic airlines and over the years, a significant proportion
of AC travelers for Indian Railways has converted to low cost domestic
airlines as there is not so much cost difference, if one compare with
the time & service quality in IR.
Jet has to also ensure stability of its higher management in the months
ahead and part form that some common risks for domestic airlines may be :
1. Sharp spike in crude prices
2. Global recession probability, which may lower air traffic to a
significant proportion
3. Depreciation of INR and cross-currency headwinds
4. Any geo-political risks in middle east, including oil prices melt
down to below $25-20
*As par BG metrics and current market parameters:*
(Based on TTM & FWD EPS)
Projected median valuation of Jet : 955-1025-1100 (FY:16-18/FWD)
(if the current Q3 earnings growth momentum is maintained)
SCRIP EPS(TTM) BV(Act) P/E(AVG) Low High Median
200-DEMA 10-DEMA
JETAIRWAYS -83.87 -387.83 15 #NUM! #NUM! #NUM! 473.51
600.88
JETAIRWAYS 113.55 -325.25 15 898.06 1011.66 954.86
473.51 600.88
JETAIRWAYS 130.75 -290.75 15 963.68 1085.58 1024.63
473.51 600.88
JETAIRWAYS 150.55 -245.25 15 1034.07 1164.88
1099.47 473.51 600.88
*Technically, Jet may in the 5-th Wave of monthly EW cycle and the
projected target of the same may be around 585-635, if the support zone
of 515-505 holds.*
*Analytical Charts:*
<https://3.bp.blogspot.com/-U0qP4PJbi80/VrgNBhHlO9I/AAAAAAAAGC4/0dzBS__jU4g/s1600/Jet-05-02-2016.png>
<https://3.bp.blogspot.com/-EX8V36xH_d4/VrgNDMk-uKI/AAAAAAAAGC8/12Rd1QXeMTM/s1600/Jet-FIBB-05-02-2016.png>
<https://4.bp.blogspot.com/-Qt1gWdtnxgM/VrgNFJCbS1I/AAAAAAAAGDA/cx5GiHR4cUs/s1600/JET-MA-05-02-2016.png>
<https://2.bp.blogspot.com/-3WE2gL8YHZs/VrgNGWPnz6I/AAAAAAAAGDE/oSf3tRbk3K8/s1600/JET-TL-05-02-2016.png>
<https://4.bp.blogspot.com/-7m2xBCIB6XI/VrgNID1CZWI/AAAAAAAAGDI/GuP9k9nDO_0/s1600/Jet-Pattern-05-02-2016.png>
<https://4.bp.blogspot.com/-C5RkIRxMRVY/VrgNJUuD0kI/AAAAAAAAGDM/XxwdmDJTyMg/s1600/Jet-EW-05-02-2016.png>
--
Thanks & Regards,
Asis Ghosh
(asisghosh.blogspot.com)
--
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