Indian Financial Markets: aviation

Showing posts with label aviation. Show all posts

Monday, August 6, 2012

FDI in aviation to boost ailing industry, says Antique

Mon, Aug 06, 2012 at 12:00

Like this story, share it with millions of investors on M3

FDI in aviation to boost ailing industry, says AntiqueVikram Suryavanshi of Antique Stock Broking is quite happy with the quarterly results of these two companies and feels it is important to watch how they maintain yields and load factor. If they successfully manage these, there would be a strong case for rerating the industry, Suryavanshi told CNBC-TV18. Share . Email . Print . A+A- FDI in aviation to boost ailing industry, says Antique

Jet Airways as well as SpiceJet came up with good performances in the first quarter of FY13. Vikram Suryavanshi of Antique Stock Broking is quite happy with the quarterly results of these two companies and feels it is important to watch how they maintain yields and load factor. If they successfully manage these, there would be a strong case for rerating the industry, Suryavanshi told CNBC-TV18.

Suryavanshi believes foreign direct investment (FDI) in aviation will help the ailing aviation sector to boost its balance sheets. Moreover, the government's role in introducing policies favouring the sector will have a positive impact on the ailing companies.

Below is the edited transcript of the interview on CNBC-TV18.

Q: Take us through the key parameters or maybe a comparison between the performance of Jet and SpiceJet. How do you think both of them did operationally and which one do you think came out with a better performance this quarter?

A: We have seen very strong improvement in the first quarter operational numbers. We have seen almost 33% growth in Jet's domestic revenue while SpiceJet's revenue growth is 55%. In terms of growth rates, SpiceJet has really done well and even been able to improve its market share from 14% to around 18.6%.

In terms of load factor also SpiceJet has done around 80%. If you look at Jet, domestic load factors are around 75%. Both have improved but, I think SpiceJet has operationally done really well and even in terms of EBITDA margin which used to be in single digits, it has moved to almost 18-19% and it is really encouraging.

If you look at this industry, there are two major problems - one is very high taxes on the ETF and second is the pricing discipline. We are clearly seeing signs that they have got huge confidence in terms of pricing discipline and that gives a strong confidence. We have to wait and see how they maintain these yields and load factor. If that happens, there is a strong case to rerate this industry.

Q: While it is a bottom-line profit for both the companies after four or five quarters, it is also because of other income. It is because of sell and leaseback money that they have got and this is not really an operational income for the companies. Would you think it is very tenuous coming into the black and things can topple over?

A: What you mentioned is true but, the fourth quarter losses were very high. It was close to Rs 200-300 crore losses per quarter. Even if you remove this, they are still breakeven. Basically, they have turned around from almost Rs 200 crore losses to a breakeven level by addressing one parameter in this quarter and that’s pricing discipline.

Now that the industry is mainly run by four players and there has been a pricing discipline from a very sub-optimal level, they are holding prices. Secondly, we are looking at delta from fuel prices. We have very discretionary prices for domestic and international operations.

So government can do away with some of the taxes which are very high in the domestic market. I think there is a huge delta which can play in for these companies because sensitivity with fuel is very high.

In case of SpiceJet, even Rs 1 change in fuel levies will have almost Rs 40-45 crore change in bottom-line and that is Re 1 EPS. What we are looking at is that pricing discipline has come into the system and now with government support, if some taxes on fuel is reduced, they can maintain a huge margin at the bottom-line. That is what we are looking at from the industry.

From DJ EU Officials Spain Aid Cap Of 100 Bn Euros 'should Be Enough'

The latest earning numbers FIRST on CNBC-TV18

View the original article here

IT, telecom, aviation: Is this right time to bet on them?

Mon, Aug 06, 2012 at 09:34

Like this story, share it with millions of investors on M3

IT, telecom, aviation: Is this right time to bet on them?In an interview to CNBC-TV18 Rajat Rajgharia, head of research at Motilal Oswal Securities shared views on stocks across various sectors. He also citied outlook for sectors like telecom, aviation, IT and others. . Share . Email . Print . A+A- Rajat Rajgarhia, HoR, Motilal Oswal Sec

In an interview to CNBC-TV18 Rajat Rajgharia, head of research at Motilal Oswal Securities shared views on stocks across various sectors. He also citied outlook for sectors like telecom, aviation, IT and others.

Given the kind of news flow, he expects investors to remain low on the telecom. "This sector continues to be quite badly impacted. With the reserve price at Rs 14,000 crore, you will see companies being less aggressive while bidding," he elaborated.

From the IT space, he is bullish on stocks like Mahindra Satyam , Hexaware and HCL Tech . "We follow a very bottom-up approach on each of these midcap IT companies. Some of them have reported fairly good numbers and that is getting reflected in their stock price."

Further, he pointed out that aviation sector is getting structurally favourable for stronger players like Jet Airways and SpiceJet on the back anticipation of foreign funds flowing the sector anytime. He suggested that one can look at these stocks from a trading perspective, but they may not necessarily be suited for investment.

Below is the edited transcript of Rajgharia's interview with CNBC-TV18.

Q: The week ends with SBI' s numbers. After looking at what other public sector banks have done where are you pegging your expectations?

A: On the public sector banks we think SBI should still be one of the best banks from a numbers point of view this quarter. Because their net interest margins (NIM) continue to be very strong and second, I think while they will still add NPLs this quarter, the fourth quarter was an aberration. The net increase in the slippages will be much lower than what as a trend we have seen in the rest of the banks.

The numbers for SBI should be reasonably good. Our profit estimates are closer to Rs 3,400-3,500 crore, which will almost be the second highest profit after the last quarter profit that they reported. So, SBI should have reasonably okay numbers for June quarter.

Q: What did you make of the telecom spectrum reserve price and how would you approach these stocks now?

A: This sector continues to be quite badly impacted by all these things that we keep on hearing. Now with the reserve price at Rs 14,000 crore will surely reduce the number of circles that some of the companies may look to bid. This is because the ability to incur this amount of capex is not there in the system.

Secondly, if you look at the return ratios for the sector - probably the top three companies continue to earn very low return ratios and most of the sector is bleeding. So, you will see companies being less aggressive when they come up for bidding.

Things relating to what would be the policy on excess of contracted spectrum will be more important from an incumbent’s point of view. As of now, investors will remain low on telecom till the time they do not see changes being made, what new pricing policies will come up and what would be the total impact on each company in the sector.

Q: A lot of midcap IT companies have done better than their large cap peers in this quarter, Mahindra Satyam being the latest one. Have you upgraded any of these companies or have you changed the mix around in your IT portfolio?

A: Large cap ITs have always been in allocation gain. The difference between large cap and IT market caps are so huge that for investors to replace any one company with other is just not possible. We follow a very bottom-up approach on each of these midcap IT companies. Some of the companies like Mahindra Satyam, Hexaware etc. have reported fairly good numbers and that is also getting reflected in the way these stocks are trading.

From DJ EU Officials Spain Aid Cap Of 100 Bn Euros 'should Be Enough'

The latest earning numbers FIRST on CNBC-TV18

View the original article here