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Edelweiss downgrades, cuts target price of Jet Airways after recent dramatic events

Edelweiss downgrades, cuts target price of Jet Airways after recent dramatic events

Edelweiss downgrades, cuts target price of Jet Airways after recent dramatic events
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By CNBC-TV18 Apr 10, 2019 6:08:45 PM IST (Published)

Edelweiss downgraded Jet Airways from ‘hold’ to ‘reduce’ after Jet Airways dramatic turn of events. The brokerage cut the target price by 22 percent to Rs 177 a share. 

Edelweiss downgraded Jet Airways from ‘hold’ to ‘reduce’ after dramatic turn of events recently. The brokerage cut the target price by 22 percent to Rs 177 a share.

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The brokerage firm said, “Three-fourths of Jet’s original fleet has been grounded. Rampant flight cancellations has dented the franchise’s reputation. The airline’s berthing rights are being relinquished, especially at congested airports and prized international airports.”
“We are cutting EBITDAR forecast by 35 percent for FY20E and 49 percent for FY21E following a 30 percent cut in India’s domestic passenger (PAX) forecasts," it added.
Edelweiss expects Q4FY19E PAX to tank 30 percent YoY against 17 percent growth for SpiceJet and 15 percent for IndiGo. Operating leverage would precipitate an EBITDAR (Earnings before Interest, Tax, Depreciation, Amortisation and rent costs) crash of 90 percent and PAT (Profit after Tax) loss of Rs 10 billion plus.
“According to the CEO of Yatra.com, yields are up 15 percent YoY on domestic routes enabling IndiGo and SpiceJet to clock a RASK (Revenue per available seat kilometer) improvement of 10 percent plus YoY in Q4FY19E”, the research report added.
The report further said that IndiGo has doubled its international market share to 8 percent, capitalising Jet Airways key markets. Thus, Edelweiss recommended a switch into IndiGo and SpiceJet.
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