MO assumes crude oil at $40 for 2016-17 and $50 for 2017-18.
i am still invested fully since ipo and increasing position.so be carefull …about my view
1.crud oil may have a rang between 30 -60
2.no competition to increase soon …
3.indigo was hammered due to over valuation and q2 results.
4.delivery of planes are delayed and they have staff and pilots ready so extra expenses…
5.no comment on delivery of planes.
…market want a reason to correct any way:grinning:
India’s Domestic Air Passenger Traffic 'Grew 20% y-o-y in 2015’
Low crude is not helping airlines as to gain market share, airfare- predatory pricing will happen. Also spicejet having low PE compared to Indigo is valuation wise attractive. Indigo promoters dividend debacle, non disclosure attitude, delay in airbus delivery, lack of international flights compared to Jet etc are major headwinds for indigo. Overal aviation sector has poor ROCE- its a tough sector.
Growth in aviation traffic is well forecasted. However will traffic rise result in rise in earnings & value & finally stock price is what nation wants to know ? As Arnab would put it
Whats the dividend yield of Indigo ?
On moneycontrol & economic times it shows a crazy figure of 48.69% which is almost not practical.
couple of articles which show the problems with the A320neo seems to be ending
Disc : invested
I’m invested in INDIGO airlines and own 60% in my portfolio. The below calculation is only part of my weekend’s work and doesn’t show my intention to buy/hold/sell the stock.
Actual Numbers are from DGCA and projections are purely guess (No rational thinking)Analysis.xlsx (13.0 KB).
Notes/Assumptions : No one accurately guess / predict the future growth/issues. But my thoughts
1.49% FDI limit if increased can increase the. competition.
2. If fuel prices increase they wiil dent the profits in a huge way.
3. Any 9/11 kind of attack can significantly frighten people to travel through air.
4. New Aircrafts which are more fuel efficient and reduce the significant operating costs.
5. A320s with capacity around 180 seats may not be viable for remote areas because of smaller air strips or no infrastructure in remote areas. If smaller air crafts are used they will increase the operating cost.
6. Any other carriers can copy the business model of “sale lease back” business.
7. My Ability to weigh any of the above factors or any other factors which I couldn’t foresee.
My Strong Convictions
- Oil prices may go up or down, but fuel efficient aircrafts (supposedly 15% reduction in fuel costs with A320 neos) will provide the cushion with which Indigo Airlines can gain significant market share and whatever profit made by Indigo will be greater than the whole Industry. (Already this is proven according to management’s previous claims).
- Airbus A320 Neos may be delivered this year or next year I don’t care as long as they are fuel efficient than the entire fleet of other airlines.
- There are questions regarding the management stripping of the company from their retained earnings just before IPO, but my strong belief is management is going to give huge dividends going forward too. If not I feel definitely decrease my holding.
- India is a vast country which still requires lot of flights and my personal belief is airline industry is growing atleast 10% and will grow atleast 15% for the next couple of years, will eventually normalize to 10% growth.
- Cash in Hand in Indigo is the difference between Indigo and other carriers as of now. Existing listed carriers are having huge debts in their books.
- Even if others copy the business model of sale/lease back it is highly difficult to scale up and beat Indigo in their own business.
- I believe Indigo has become the virtual monopoly with pricing strategy but if Government /CCI resorts to pricing caps then it’s detrimental to business.
@p2phani 60% allocation is an extreme concentrated bet. Indigo does seem to better than the other airlines , however lets not forget that most of the gains have come from low fuel prices and not efficiency.
IMHO, the movement in aviation stocks was based mostly on sentiments rather than fundamentals. Even though fuel costs are going down, the companies are passing on the benefit to its customers and engaging in price wars as can be seen from the latest revenue numbers of all the players. Indigo could be a good investment. Only time will tell. I am optimistic but not nearly as optimistic as you to give it such high allocation in my portfolio.
@sagaraya, I think I already mentioned fuel prices as risk but I feel if fuel prices rise, then eventually Indigo is going to be the beneficiary because other players in the industry are going to bleed. This is already proven.
Some investor advised if a company gains market share at the expense of margins, then definitely that company is worth while to invest because eventually they can reap benefits with small increase in their margins.
If any of my thesis is proven wrong I will eventually exit. Thank you for your suggestion though.
I am not invested and far from convinced.
But this post below has got me thinking ( the part about how Southwest airlines generated handsome long term compounded returns).
CONFERENCE CALL - from Capital Markets
Expectsgrowth of 34% in ASKs and 23% in capacity forFY17e
InterGlobe Aviation has conducted a conference call on 29 April 2016 to discuss the financial performance for the fourth quarter ended March 2016 and FY 2016 and way forward. President and Whole-time Director – Mr.AdityaGhosh, Chief Financial Officer – Mr.PankajMadan, Chief Commercial Officer – Mr. Sanjay Kumar and our Chief Aircraft Acquisition, and Financing Officer – Mr.Riyaz Peer Mohamed, addressed the conference call.
Highlights of the Concall
- The Company saw flatnet profit of Rs 579.31 crore on 7% jump in total income from operation to Rs 4090.68 crore for the quarter ended March 2016. For the quarter, passenger revenues grew 5.4% to Rs 3534.56 crore and ancillary revenue jumped 17.6% to Rs 532.17 crore.
- For the FY 2016, IndiGo’s net profit climbed 53% to Rs 1989.72 crore on 16% rise in total income from operations to Rs 16139.91 crore. Passenger revenues grew 14.4% to Rs 14062.42 crore and ancillary revenue jumped 27.3% to Rs 200.20 crore.
- Total expenses grew 12% to Rs 3436.75 crore for the quarter ended March 2016. CASK excluding fuel was Rs 2.02, an increase of 9.9% over the same quarter last year. The Indian rupee depreciated from Rs 62.51/USD to Rs 66.16/USD over this period which had an adverse impact on the overall costs.
- For FY16, total expense increased by 10% to Rs 13772.35 crore.CASK excluding fuel was Rs 2.01, an increase of 11.5% over the same quarter last year.
- The Company revenue per available seat kilometers or RASK for the quarter ended March 2016 was Rs.3.64, down by 9.5% from Rs.4.02 same period last year. For FY16, RASK was Rs.3.78, down by 4.2% from Rs.3.95 same period last year. The average fares have reduced 15.2% to Rs.4667 in March quarter an declined 13% to Rs 4248 for FY16.
- The Company has achieved load factors of 85.1% in March quarter, up 2.3% from corresponding last quarter.
- For Q4FY16, the Company had a Technical Dispatch Reliability of 99.94%, on-time performance of 81.6% at four key metros, and average flight cancellation rate of 0.39%.
- For FY16, the Company had a Technical Dispatch Reliability of 99.95%, on-time performance of 83.8% at four key metros, and average flight cancellation rate of 0.35%.
- The Company has announced a final dividend of Rs 15 per share. Including the interim dividend issued prior to the IPO, IndiGo has distributed Rs 42.83 per share for the fiscal year 2016 based on the shares outstanding at the year end.
- As of 31 March 2016, IndiGo had a total cash of Rs 6046.80 crore comprising of Rs 2262.30 million of free cash and Rs 3784.50 crore of restricted cash. The total cash as of 31 March 2016 includes primary IPO proceeds of Rs 515.8 crore and gross final dividend amounting to Rs 650.6 crore.
- The total debt reduced to Rs 3200.8 crore as on 31 March 2016 from Rs 3926.2 crore as on 31 March 2015. Entire debt for IndiGo is aircraft related and IndiGo does not have any working capital debt.
- The Company fleet size increased to 107 aircraft. Average fleet age of 4.6 years. The Company added Dehradun as the 35th domestic destination, 40th including international destinations. The Company achieved operated peak of 731 daily flights including international operations.
- The Company get delivery of A320neos in March 2016. The A320neo powered by Pratt and Whitney’s fuel efficient geared turbo fan engines will enable the Company to structurally reduce costs as fuel continues to be the single largest element of cost structure.
- The Company expects to end FY17 with a fleet of 136 aircraft, with 34% rise in ASKs and 23% growth in capacity increase in ASKs.
Can someone help me understand analysis of this news on Indigo and Spicejet?
Which airlines in India currently fly international and how lucrative is the market?
Is this stock dead ? This has been a marked under performer in my portfolio both in terms of price and earnings. Is loss booking advisable at these levels. Shall I average at around 800 levels?
Disclaimer: This is not a reccomendation to either buy or sell.
“While it refrained from participating equally initially (in the fare war) the same resulted in steep decline in its load factor in June to 78 percent, from 87 percent YoY,” said a Kotak note on the company’s earnings, post the management call.
“This has led to a rethink on management’s part; it is thus now looking to more aggressively match the market fares going forward, implying that near-term margins will remain under pressure,” the note said.
CEO Aditya Ghosh said in the call that IndiGo may have to delay taking delivery of additional A320neo planes, because of the problems in the Pratt & Whitney engines, CNBC-TV18 reports.
I too am in a catch 22 as Indigo has been a negative performer in my portfolio.
Industry condition favours the company (20:20 rule, low crude price, sun-rise sector), so overall I am bullish but still cannot build enough conviction to average down… though GST could spoil the show in the short term as it will push up price and guess airlines will have to absorb some of the tax which will impact margins.
5/20 rule: Here an Indian airliner was only allowed to fly overseas if they fulfilled two condition.
~ 5 years of operations
~ 20 aircrafts under operations
New amendment last month.
20/20 rule: Here an Indian airliner will no longer have to wait for 5 years before flying abroad.
~ an airline will have to allocate 20 aircraft or 20% of their total fleet of aircraft, whichever is higher, to service local destination. This effectively means a carrier must have a minimum 21 aircraft in its fleet to fly overseas.
Whenever people discuss the airline industry the bears cite Buffett’s aversion for airline stocks and the bulls cite the example of Southwest Airlines whose stock has been a phenomenal performer in US for many years. The problem is Indigo or Spicejet is not Southwest Airlines. In India, people are much more value conscious and low cost airline is a undifferentiated business - the lowest ticket price provider wins. Add to it the challenges of fluctuating fuel prices, dominant pilot unions, high airport parking fees at airports and aviation is a difficult business to be in. So, although I travel quite frequently and most often find Indigo completely full, the airline finds it challenging to make consistent profits. And I don’t see it changing anytime soon.
For understanding the aviation industry better, one can go through the following link -
well said. So in nutshell, like you, I am (and will be in future) a customer of Indigo but not investor in Indigo. I like the company and its products but not its stock!
Airlines is still considered as.luxury and hence taxed high govts are not so much int in creating good infra at economical cost but are looking at private model which increases end cost for customers. If this can be corrected airlines will give compete with other modes of transport and dispprotionate growth will fetch good returns for airlines