 "Indigo")
A day after it posted stellar December quarter results, the InterGlobe Aviation (IndiGo) stock plunged 19.1 per cent to Rs 968.75 on Friday. The stock had hit a lower circuit after dropping over 20 per cent in intra-day trade.
While the airline’s net profit in the third quarter met analysts’ estimates, investors were not impressed by the weak second quarter. IndiGo declared financial results for the first time since its November listing. Pricing pressure and lower occupancy impacted Q2 results.
Delay in the delivery of fuel-efficient Airbus A320neo aircraft and nine per cent rise in expenses despite a fuel price reduction also weighed in. IndiGo has 101 Airbus A320 planes and was expecting delivery of its first A320neo last month.
Following the results, brokerages have lowered the earnings estimates for the airline. Motilal Oswal said it had cut the earnings estimates for FY16 by 25 per cent to factor in the actual nine-month FY 16 results. For FY17 and FY 18 the earnings estimates have been reduced by 18 per cent to factor in delays in the delivery of A320neo, higher employee costs and rentals.
Similarly, Kotak Securities has lowered net profit estimate for FY16 by 21 per cent and for FY17 and FY18 by nine per cent.
The airline’s fuel bill for the third quarter was 20% lower on a year-on-year basis. Jet fuel prices are down nearly 25 per cent on a y-o-y basis.
But the airline’s other expenses grew and the rise in expenses in the third quarter is being attributed to weakening rupee, higher depreciation and fresh hiring of pilots and crew in anticipation of A320neo deliveries. Increased tax associated with the expiry of accelerated depreciation benefits on aircraft also capped the performance.
“IndiGo continues to benefit from the favourable oil price environment, but the pressure on passenger yields and five per cent depreciation in rupee offset part of this benefit,” Citi Research analyst Michael Beer wrote in a note.
Pricing pressure and lower occupancy due to seasonality impacted Q2 results. In the second quarter the airline reported passenger loads of 78% compared to 88% in Q1 and 84.6% in Q3 FY 16. Average fares for nine months ending December has declined 12.3% to Rs 4,355 while unit revenue in the same period was down 2.2%.
