Against the backdrop of a cyclical industry with business cycles, crude oil price and currency (INR/USD) impacting earnings, InterGlobe has built a strong business model enabling it to protect downside during downturns and generate strong returns in favourable operating environments. With crude at historic lows, we expect InterGlobe’s near-term earnings to be strong and peak in early FY17 but, with its valuations rich, we initiate coverage at Equal Weight (EW) with a 12-month price target of Rs 1,203.
Competitive strengths: InterGlobe’s large order-book for aircraft (430) should afford its visibility on deliveries at good pricing until 2026, ensuring that it benefits from capital and operating efficiency (eg, low fleet age). Its focus on a single fleet type offers InterGlobe operational flexibility and reduces its maintenance costs. Its large order book also ensures that cash flow support comes in from sale and lease back gains, protecting downside during tough years. The company’s continuous cost control efforts, good record in ontime performance, appropriate selection and loading of routes, and improving ancillary revenues (11% of revenue) are other positives.
To Read the News in Full11/01/16 Barclays/Financial Express
Competitive strengths: InterGlobe’s large order-book for aircraft (430) should afford its visibility on deliveries at good pricing until 2026, ensuring that it benefits from capital and operating efficiency (eg, low fleet age). Its focus on a single fleet type offers InterGlobe operational flexibility and reduces its maintenance costs. Its large order book also ensures that cash flow support comes in from sale and lease back gains, protecting downside during tough years. The company’s continuous cost control efforts, good record in ontime performance, appropriate selection and loading of routes, and improving ancillary revenues (11% of revenue) are other positives.
To Read the News in Full11/01/16 Barclays/Financial Express
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