Moneycontrol
May 02, 2018 11:42 AM IST | Source: Moneycontrol.com

High fuel costs, grounding of fleet could weigh on IndiGo’s Q4 net profit

According to a poll of analysts by Reuters, the company may see a drop to Rs 460.20 crore for the March quarter from Rs 760.2 crore reported during the December quarter.

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Interglobe Aviation, which runs the airline IndiGo, is likely to post a drop in its profits for the March quarter because of rising fuel costs and other issues such as grounding of planes.

According to a poll of analysts by Reuters, the company may see its profit drop to Rs 460.20 crore for the March quarter, as against Rs 760.2 crore reported during the December quarter. Its revenue is seen rising to Rs 5,965.3 crore from the Rs 5,752.9 crore reported in the preceding quarter.

During the quarter under review, Directorate General of Civil Aviation (DGCA) had grounded a few of IndiGo's Airbus A320neo aircraft due to the ongoing Pratt & Whitney engine issue pertaining to the model. DGCA had asked IndiGo to ground as many as eight of its A320neo aircraft.

Here’s what multiple brokerages are watching out for in the company's results announcement.

Kotak Securities

The brokerage expects strong revenue growth, driven by a 30 percent YoY growth in passenger volumes and a 1 percent increase in average ticket price.

It also sees a 9.5 percent sequential increase in the price of aviation turbine fuel resulting in a 360 basis points reduction in the company's EBITDA margin on a sequential basis.

Elara Capital

Elara Capital sees IndiGo reporting a 24 percent YoY decline in earnings due to flat yields and a 14 percent increase in fuel cost per unit. These could be partially offset by the expected 22 percent growth in passenger volume the company will likely witness.

At 22 percent, IndiGo’s passenger volume growth would be in-line with the industry's growth of 20 percent. But having said that, the grounding of 11 A320neo aircraft could weigh on the airline's financials.

Motilal Oswal

The brokerage said that among the key issues to watch out for would be the induction of new aircraft in IndiGo's fleet and the impact of fuel costs.

The stock has fallen around 7 percent over the past three days. It ended Monday at Rs 1,399.70, down 0.50 percent from its previous close.
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