InterGlobe Aviation skids 11% on weak June quarter results

InterGlobe Aviation (owner of airline IndiGo) has dipped 11% to Rs 891, also its 52-week low on the BSE in early morning trade, after the company reported a 96% year on year (yoy) decline in net profit at Rs 278 million in June 2018 (Q1FY19) quarter. The analysts on an average had expected a profit of Rs 5 billion.

The profitability was majorly impacted by the adverse impact of foreign exchange, high fuel prices and the competitive fare environment.

Total income grew 14.5% yoy at Rs 68.18 billion against Rs 59.55 billion in the corresponding quarter of previous fiscal. EBITDAR (earnings before interest, taxes, depreciation, amortization and rent/restructuring costs) margin dropped to 17.4% in Q1FY19 from 34.1% in Q1FY18.

Fuel has been the biggest drag, with a liter costing 30% more than the same quarter a year before. As it is 40% of the overall cost, a rise in this weighs down the performance. The company also indicated a Rs 2.46 billion forex loss, as against a Rs 66 million gain in the year-ago quarter.

“IndiGo’s RASK (revenue per available seat-kilometer) at Rs 3.7 was lower than our estimate of Rs 3.9. IndiGo’s RASK discount over SpiceJet, which was usually at Rs 0.27 in past, was expanding since Q4FY17 and widened to around Rs 0.50 during Q4FY18,” analysts at Elara Capital said in the quarterly update.

“We expect it to further expand due to IndiGo’s focus on market share at the expense of yield. During the conference call, management highlighted about downward utilization pressure during 0-15 day advance booking window, thereby not raising the airfares. However, we observed domestic aviation industry PLF (passenger load factor) approached around 90% in Q1FY19, which bodes well for domestic carriers,” the brokerage firm said.

In past two and half months, shares of IndiGo has tanked 41% from its 52-week high of Rs 1,520 touched on April 20, 2018.

At 10:00 am; the stock was trading 10% lower at Rs 907 on the BSE, as compared to 0.22% decline in the S&P BSE Sensex. The trading volumes on the counter surged multiple folds with a combined 4.38 million equity shares changed hands on the counter on the BSE and NSE so far.

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