Indigo Q4FY18 preview: Share price hit on Aditya Ghosh exit, ATF rate hike; analysts eye earnings decline

Interglobe Aviation (Indigo) share price tumbled by more than 3% on stock exchanges ahead of fourth quarter ended March 2018 result announcement. The stock price of the company has taken a hit as analysts believe the earning will be hampered in the end of fiscal FY18. The company will present the financial audit report anytime on Wednesday, however looks like investors have low faith in the company at the moment. Investors reaction can be attributed to a list of factors apart from Q4FY18 projection; firstly internal management concerns with the exit of CEO Aditya Ghosh, secondly GoAir suing their CFO Wolfgang Prock-Schauer over alleged data stealing and lastly Indian OMCs increasing their jet fuel prices. 

After touching intraday low of Rs 1,353 per piece on BSE, the share price of Indigo was trading at Rs 1,364.30 per piece down by Rs 35.40 or 2.53% at around 1056 hours. 

Since the time Indigo announced the exit of CEO and MD Aditya Ghosh on April 27, the share price of the company has dropped by 10% on exchanges. 

Meanwhile, the Indian Oil Corp (IOC) hiked jet fuel prices by 6.5% to Rs 65,340 per kilometer as against previous price of Rs 61,450 per kilometer. 

On the other hand, Wolfgang Prock-Schauer who joined Indigo in February this year, has been accused with data theft by it’s former employer GoAir. Currently a suit has been filed in Bombay High Court against Prock-Schauer. 

While Indigo is still struggling to recover from the above mentioned factors, the analysts expectation in Q4FY18 also comes as a shocker considering the robust performance the airline gave in third quarter of FY18. 

According to IIFL Research report, Indigo maintained highest market share of ~40% followed by Jet Airways, Air India and SpiceJet at 14.3%, 13.3% and 12.6% respectively during FY18.

Talking on Q4FY18 performance, Gagan Dixit and Rachel Alva analysts at Elara Capital said, “We expect IndiGo would report 24% YoY earnings decline due to flat yields and 14% YoY unit fuel cost increase, partially offset by 22% YoY growth in passenger volume during Q4FY17.”

The duo added, “ We observed IndiGo’s RASK (Revenue per ASKM) is usually at INR0.27 discount over that of SpiceJet in past, but during Q4FY17, IndiGo’s RASK discount over SpiceJet widened to Rs 0.42 during Q3FY18 and expect would further expand to Rs 0.55.”

Similar to past, Indigo’s YoY passenger volume growth was at 22% YoY during Q4FY18 is in-line with industry growth of ~20% due to 22% capacity additions, though would slow down due to grounding of 11 A320Neo fleets, added the analysts. 

With this Indigo is expected to report revenue of Rs 6,005.40 crore up by 23.87% yoy in Q4FY18, followed by PAT to come in at Rs 336 crore down by 23.65 yoy and EBITDA will be at Rs 1,324.2 crore gradually below 0.60%. 

It needs to be noted that Indigo surpassed analysts estimate in both topline (revenue) and bottomline (profit) performance for the third quarter ended December 31, 2017 (Q3FY18).

Indigo posted net profit of Rs 762.03 crore in Q3FY18, witnessing a whopping 56.41% rise as compared to net profit of Rs 487.20 crore in the corresponding period of the previous year. Q3FY18 net profit also increased by  38.16% from Rs 551.55 crore in the preceding quarter (Q2FY18).