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IndiGo Q4 preview: Analysts see loss up to Rs 2,600 cr amid Covid-19 woes

Analysts at Kotak Institutional Equities estimate the net sales (or revenue) to decline 7 per cent yearly, but 26 per cent sequentially to Rs 7,345.2 crore.
With suspension of international air travel for two weeks, and domestic air travel for about 10 days due to the lockdown in the March quarter of FY20 (Q4FY20) on account of Covid-19 pandemic, analysts expect InterGlobe Aviation-run IndiGo to report net loss up to Rs 2,600 crore, compared to net profit of Rs 589.6 crore in Q4FY19. That apart, seasonal slowdown and pricing pressure during the period under review is also likely to dent performance, analysts say. The airline had reported profit of Rs 496 crore in the December quarter of FY20.

Rise in fuel and non-fuel costs due to depreciation of rupee by about 3 per cent during the quarter, slight decline in passenger load factor, but marginal expansion in fleet capacity are some other factors likely to impact earnings. The airline is slated to report its March quarter earnings on Tuesday, June 2.

During the quarter under review, the stock of the Gurgaon-based airline marginally outperformed the market. The stock price of IndiGo slipped 20 per cent, while the benchmark S&P BSE Sensex skid 28.5 per cent during the period, ACE Equity data show.


Analysts expect the airline to report a net loss of Rs 1,015.4 crore, while they peg the loss before tax at Rs 1,353.8 crore. It had clocked a profit before tax (PBT) of Rs 616.8 crore in Q4FY19, and Rs 556.5 crore in Q3FY20.

“We forecast capacity growth of 5 per cent, traffic growth of 3.2 per cent, and a load factor of 84.7 per cent, down 1.3 pts year-on-year (YoY). That apart, we forecast passenger yield per RPK to decline by 7.5 per cent YoY, partly due to the strong base impact. Along with the traffic growth, we forecast total operating revenue to decline by 3.2 per cent YoY,” wrote Achal Kumar, analyst at the brokerage, along with Andrew Lobbenberg and Parash Jain in an earnings expectation’s note.

Centrum Broking

Ashish Shah, aviation analyst at the brokerage, expects the passenger load factor to decline sharply by 350bps YoY to 82.5 per cent during the quarter under review, while total passengers ferried may rise marginally to 17.6 million, up 0.6 per cent YoY.

“Fuel costs are likely to inch up 2 per cent YoY due to 3.1 per cent YoY rise in blended aviation turbine fuel (ATF) prices during the quarter. The cost per available seat-kilometer (CASK) ex-fuel is likely to grow sharply by 43.2 per cent YoY due to higher maintenance costs and MTM loss of Rs 1,010 crore in Q4FY20E relative to MTM gain of Rs 10.5 crore in Q4FY19,” he wrote in the earnings purview report.

The brokerage estimates earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) loss of Rs300 crore, while net loss is pegged at Rs 1,750 crore.

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Elara Capital

The brokerage is much more conservative in its estimates than its peers and pegs the private airline’s net loss at Rs 2,604.7 crore. The earnings before interest, taxes, depreciation, amortization (EBITDA) loss, meanwhile, is seen at Rs 624 crore, as against EBITDA profit of Rs 1,801.2 crore in Q3FY20, and Rs 590.2 crore in Q4FY19.

“We expect a YoY yield decrease of IndiGo by 8 per cent as fear of Covid-19 outbreak would have kept airfares in check, and subdued 1 per cent sequential fleet addition. IndiGo would be more negatively affected than its peer airlines due to its higher fleet size and related operating cost. However, having healthy cash in its balance sheet would help it withstand the storm,” it said in an earnings preview note.

Edelweiss Securities

“While the yield environment has deteriorated (-5 per cent YoY), weak passenger load factor (PLF) will lead to decrease in RASK (-4.3 per cent YoY). Capacity growth should remain weak at over 8 per cent YoY with PLF at 85.2 per cent. Decline in fuel CASK (-3 per cent YoY) will act as a tailwind, off-setting impact of lower yields. We expect EBITDA and PAT to hamper due to complete shutdown amid Covid-19 and forex loss,” noted the brokerage.

It estimates the airline’s revenue at Rs 8,381 crore, up 6.3 per cent YoY, from Rs 7,883.3 crore reported in Q4FY19, but down 15.6 per cent sequentially from Rs 9,931.7 crore clocked in Q3FY20.

The EBITDAR, on the other hand, is seen at Rs 770.2 crore, down 62.5 per cent YoY, and 61 per cent QoQ.

Kotal Institutional Equities

Analysts at the brokerage estimate the net sales (or revenue) to decline 7 per cent yearly, but 26 per cent sequentially to Rs 7,345.2 crore.

“We expect 11 per cent YoY decline in passenger revenues on account of around 5 per cent YoY decline in passenger volumes and 6.5 per cent decline in fares. Overall, revenue decline of 7 per cent is lower due to higher contribution of ancillary revenues,” they noted.

They see EBITDA at Rs 478.8 crore and EBITDA margin at 6.5 per cent, registering a drop of 1030 bps QoQ and 99 bps YoY.   

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