Jet Airways has had a strong month in Nov-07 in the domestic and international markets with significant improvement in load factors over 2QFY08. With the holiday season resulting in strong demand, expect December-January to be better than Oct-Nov.
During Nov-07, Jet achieved a load factor of 74.4% in the domestic market, 810bps higher than in 2QFY08.
In 3QFY08 expect both the SBUs to break even at Ebitda level. However, Jet will report net losses during 3QFY08 with increase in interest and depreciation costs. This does not take into account any gains on forex. Oil prices over $90 / barrel is putting pressure on the bottomline. Aviation Ministry’s demand to refund difference of Oil surcharge is just an eye wash and a political gimmick played by the Minister Praful Patel and will not impact Jet Airways.
Jet’s middle east routes appear to be attractive. Plans to fly to US west coast via Shanghai are likely to be delayed due to delays in agreements between the two governments.
Jet Airways is expetc to report a net loss of 183 crore in FY09 and a net profit of Rs 669 crores in FY2010. CLSA is upgrading price target to Rs1,400, based on 7.6xFY10CL EV/ Ebitdar.
Only high risk investors can look at this recommendation from CLSA. Investors who bought Jet Airways in IPO can consider exiting once the stock rises to higher levels.