Aviation companies such as InterGlobe Aviation, SpiceJet and Jet Airways performed relatively better on a year-on-year basis in terms of topline and bottomline growth for the first quarter ended June 30, 2016. During April-June, InterGlobe Aviation, or IndiGo, reported 7.37 per cent fall in net profit at Rs 591.77 crore against Rs 638.90 crore in the same quarter last year. Jet Airways posted net profit of Rs 103.14 crore for the quarter under review against net profit of Rs 221.70 crore in the same quarter last year. SpiceJet registered net profit of Rs 149.03 crore against Rs 72.97 crore in the same period a year ago.
Among the three-listed airline companies, brokerage firm Prabhudas Lilladher believes Spicejet is in a strong position to provide the best profitability growth in the sector, coupled with cheaper valuations as compared to the industry leader, InterGlobe Aviation.
However, ICICI Securities is bullish on InterGlobe Aviation shares. The brokerage firm in a research note last month said, “With the largest committed orderbook, IndiGo remains to benefit the most from the strong domestic demand, while cost structure remain most efficient along with further economies available along with ramp up in capacity. The current market price factors cumulative fare decline of 10 per cent for FY17/18E, which we believe is very pessimistic considering we already had two consecutive years of fare decline of 5 per cent and 15 per cent in FY15/16.” ICICI Securities has ‘Buy’ on InterGlobe Aviation shares with a target price of Rs 1,225. The brokerage house has ‘Add’ rating on Jet Airways shares with a target price of Rs 600.
SpiceJet and InterGlobe Aviation reported 36.54 per cent and 8.50 per cent year-on-year growth in net sales at Rs 1,506.36 crore and Rs 4545.19 crore for the quarer ended June 30, 2016. Jet Airways posted 3 per cent year-on-year fall in net sales at Rs 4689.87 crore.
Prabhudas Lilladher expects the revenue of SpiceJet will grow at CAGR of 12.70 per cent over FY15-18. The brokerage house is bullish on SpiceJet shares with a targe price of Rs 115.
According to market experts, domestic airline sector is in a sustained growth phase on the back of multiple levers like increasing load factor, sustained growth in passenger traffic and fall in jet fuel prices. ICICI Securities further added that domestic airlines industry has been stressed by intense pricing pressure during the first half of the ongoing calendar year 2016. However, there are signs of reversal in the same with unusually strong recovery witnessed in August in particular.
Since the beginning of the ongoing financial year, aviation stocks have underperformed benchmark indices with SpiceJet falling 6.90 per cent to Rs 61.40 till September 12. IndiGo and Jet Airways declined 6.25 per cent and 4.42 per cent, respectively, during the same period. The BSE Sensex jumped 12 per cent during April 1 and September 12 this year.