Hold Jet Airways; target Rs 370: ICICIdirect.com
Brokerage house ICICIdirect.com has recommended hold rating on Jet Airways with a target price of Rs 370, in its October 25, 2013 research report.
October 25, 2013 / 17:32 IST
ICICIdirect.com's report on Jet Airways
"Jet Airways, the lean season coupled with a sharp weakness in currency and high fuel prices have led to a sharp increase in losses in the current quarter. However, with the stabilisation in the rupee at Rs 61-62/US$ from a peak of Rs 68/dollar & 20-25 percent hike in airfares led by onset of peak season, we expect a sharp improvement in performance in the forthcoming quarter. In addition, the proposed fund infusion of over Rs 3,200 crore by Etihad Airways (for buying a 24 percent stake and sale of slots at Heathrow airport & sale of frequent flier programme) post CCI approval remain key positive trigger for the company, going forward. During the quarter, revenues have been mainly impacted by a sharp fall in yields (down 11 percent YoY), although total passenger traffic went up 14 percent YoY (domestic: up 16.1 percent YoY, international; up 12.4 percent YoY) on account of the launch of promotional schemes by the company. On the cost front, weakness in rupee led to additional cost burden of over Rs 231 crore in the quarter, apart from additional cost burden of Rs 217 crore led by increase in fuel cost (Rs 93 crore), cost related to aircrafts on ground (Rs 123 crore). Going ahead, with the onset of peak season & recent price hikes by Jet, we expect margins to improve in the coming quarter. The currency has also stabilised against the dollar. This, in turn, should lead to a fall in ATF prices in coming months. Although high debt with negative net worth of Rs 1700 crore remains a concern for the company, fund infusion of Rs 3,200 by Etihad post CCI approval remains a key positive trigger for Jet.""Going ahead, we expect margins to improve led by the peak season, hike in airfares and stabilisation in currency. Although high debt remains a concern, fund infusion by Etihad post CCI approval remains a key positive for Jet. Hence, we revise our target price upwards to Rs 370 (i.e. 0.6x FY14E EV/sales) implying potential upside of 9 percent with a HOLD rating," says ICICIdirect.com research report.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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