Why GEPL Capital recommends to sell Kingfisher Airlines?

“Kingfisher Airlines’ (KFA) revenue grew 10.5% Y-o-Y to Rs 15.28 bn, led by a 12.5% volume growth (RPKM) and a 1.5% decline in passenger yield (revenue/RPKM) to Rs 4.58 (Rs 4.66 in Q2FY12 and Rs 5.14 in Q1FY12). The company reported an EBITDAR loss of Rs 1.23 bn after two years, led by higher fuel prices. EBIDTA loss stood at Rs 3.72 bn in Q2FY12 as compared to a loss of Rs 786 mn in Q2FY11. The company reported a net loss of Rs 4.69 bn in Q2FY12 as compared to a loss of Rs 2.31 bn.”

“Kingfisher Airlines’ (KFA) revenue grew 10.5% Y-o-Y to Rs 15.28 bn, led by a 12.5% volume growth (RPKM) and a 1.5% decline in passenger yield (revenue/RPKM) to Rs 4.58 (Rs 4.66 in Q2FY12 and Rs 5.14 in Q1FY12). The passenger load factor (PLF) declined to 75.6% in Q2FY12, compared to 79% in Q2FY12. The capacity (ASKM) grew 17.5% Y-o-Y. Domestic revenue grew 6% Y-o-Y to Rs 12.5 bn, led by an 18% growth in RPKM and a 10% decline in passenger yield to Rs 5.52. International revenue grew 11% Y-o-Y to Rs 3.83 bn led by a 1.8% growth in RPKM and a 9.1% rise in passenger yield to Rs 3.56. Domestic revenue accounted for 75% of the total revenue in the quarter.”

“The company reported an EBITDAR loss of Rs 1.23 bn after two years led by higher fuel prices. EBIDTA loss stood at Rs 3.72 bn in Q2FY12 as compared to a loss of Rs 786 mn in Q2FY11. Domestic segment reported an EBITDA loss of Rs 1.95 bn in Q2FY12 as compared to profit of Rs 1.08 bn in Q2FY11 whereas International segment reported an EBITDA loss of Rs 760 mn in Q2FY12 as compared to loss of Rs 540 mn in Q2FY11. The company reported other income of Rs 1.02 bn in the quarter as compared to Rs 1.33 bn in the same period last year. Tax write-backs stood at Rs 2.25 bn in Q2FY12 compared to Rs 1.32 bn in Q2FY11. The company reported a net loss of Rs 4.69 bn in Q2FY12 as compared to a loss of Rs 2.31 bn.”

“We recommend a Sell on the stock in view of: a) uncertainty about debt restructuring b) sustainability of cash flows in times of rising fuel prices and consequently, c) a risk of further deterioration in the balance sheet to meet payment obligations,” says GEPL Capital research report.

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