ICICI Direct's research report on Jet AirwaysThe recent sharp fall in ATF prices (down over ~43% from peak of FY14) has provided significant room for margin expansion along with growth opportunities for the airline Industry. The Indian air travel market is highly under penetrated despite liberalising actions of the Government of India. India’s penetration of 80 per 1000 population is low relative to other developing markets such as Brazil, Turkey, Indonesia and China, where penetration rates are between 350/1000 and 650/1000, respectively. Considering these earnings growth levers, we expect Jet Airways to gain market share along with improved profitability in the next few years. Assuming the benefit of lower ATF prices, we expect EBITDA margin to scale up to 11.3% (vs. our previous estimate: 9.3%) as seen in FY11 from1% in FY15. We continue to maintain BUY on the stock with a revised target price of | 790/share (i.e. at 6x FY17E EV/EBITDA, 0.7 EV/sales). Given improving macro factors like healthy industry passenger traffic growth (up 19.7% YoY) coupled with lowest ATF prices, we expect the company to report healthy revenue growth along with better margins during FY15-17E. Hence, we remain positive on the company and maintain our BUY rating with a revised target price of | 790/share (i.e. valuing at 0.7x FY17E EV/sales, 6.5x EV/EBITDA). For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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