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Narasimhan's review
Investment Sector: Equities Submitted by Narasimhan 
, Owner
at Krish Systems
6 months ago Tags: Airlines Fast Growth HIgh Competition Huge Potential Add Tag |
COMPANY HISTORY
Jet Airways India’s largest private airline was incorporated in the year 1992 by Naresh Goyal who already owned Jet air (pvt) ltd. After the formation of Jet airways the Indian Airlines which enjoyed monopoly over the Indian aviation industry faced a tough competition. Jet airways commenced its services as an “Air Taxi” operator. Then in 1993 the company started its commercial operations with 24 daily flights and 4 Boeing 737-300 aircrafts, connecting 12 destinations .Now the company is having more than 260 daily flights serving more than 60 destinations.
It is serving most of the big cities of India and many major global countries. It is the first private airline company to connect international destinations. Jet airways is having Global alliance with many major International airlines and that includes South-African Airways, Lufthansa, Cathay Pacific, American airlines, Air France ,Northwest Airlines and British Airways. Jet airways fleet consists of high class sophisticated aircrafts like Airbus, Boeing etc, and as on June 2008 the average age of Jet airways Fleet is 4.1 years. In 2006-2007 Jet airways take over its major rival Air Sahara and became India’s largest Airlines.
FINANCIALS
The company announced its final quarter results of FY 08 recently. The company posted a net loss of Rs.2211.8 million for the quarter ended March 2008 against net profit of Rs.8801 million in the same period last year. However, the total income of the company rose to Rs 27270.2 million for the last quarter versus total income of Rs.19890.3 million growing at 14%.
| Rs Millions | Mar ' 08 | Dec ' 07 | Sep ' 07 | Jun ' 07 | Mar ' 07 |
| Sales | 27599 | 24259.8 | 18185.5 | 18066.7 | 19782.7 |
| Operating profit | 639 | 1542.3 | -1008 | 703.3 | 2846.4 |
| Interest | 1549.2 | 1554.1 | 1179.9 | 644.3 | 530 |
| Gross profit | -1239 | 900.2 | 2168.3 | 1822.6 | 2424 |
| Depreciation | 2502.9 | 2204 | 1743.3 | 1327.8 | 1209.6 |
| Net profit / loss | -2211.8 | -911.2 | 283.6 | 308.8 | 880.1 |
| Equity capital | 1011.8 | 1011.8 | 1011.8 | 1011.8 | 1011.8 |
| EPS (Rs) | -25.62 | -10.55 | 3.29 | 3.58 | 10.19 |
| OPM (%) | 2.32% | 6.36% | -5.54% | 3.89% | 14.39% |
| GPM (%) | -4.49% | 3.71% | 11.92% | 10.09% | 12.25% |
| NPM (%) | -8.01% | -3.76% | 1.56% | 1.71% | 4.45% |
COMPARISON WITH PEERS
| Rs Millions | Jet Airways | Container Corp | Allcargo Global | Deccan Aviation | Spice Jet |
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| Sales Turnover | 27599 | 9035.9 | 959.2 | 5576.1 | 4085.1 |
| Other Income | -328.8 | 495.1 | 8.7 | 500.5 | 294.6 |
| Total Income | 27270.2 | 9531 | 967.9 | 6076.6 | 4379.7 |
| Total Expenses | 26960 | 6713.9 | 707.4 | 7663.6 | 4258.9 |
| Operating Profit | 639 | 2322 | 251.8 | -2087.5 | -173.8 |
| Gross Profit | 310.2 | 2817.1 | 260.5 | -1587 | 120.8 |
| PBDT | -1239 | 2817.1 | 254 | -1866.7 | 116.5 |
| Depreciation | 2502.9 | 267.3 | 37.2 | 115.7 | 20.1 |
| PBT | -3741.9 | 2549.8 | 216.8 | -1982.4 | 96.4 |
| Tax | -1530.1 | 520 | 53.7 | 0 | 3 |
| Net Profit | -2211.8 | 2029.8 | 163.1 | -1996.5 | 93.4 |
| Equity | 863.3 | 649.9 | 202.6 | 1358 | 2406.5 |
| OPM | 2.32% | 25.70% | 26.25% | -37.44% | -4.25% |
| NPM | -8.11% | 21.30% | 16.85% | -32.86% | 2.13% |
Most of Passenger carriers posted negative results for this quarter. But the cargo carriers like Container Corporation and Allcargo global posted good results. These companies were able to raise their fares for freight goods frequently. The regular airlines were unable to cover the rising operating costs due to rise in the price of the aviation fuel through full revision of fares. When the travel becomes costlier it slows down the demand for air travel in the cost conscious domestic market. Therefore company is focusing to enhance its international network. The company recently entered in to code share agreements with Air Canada, American airlines etc.
It is evident from the above chart that the company is now on a decreasing phase. The stock is trading at level of Rs. 490-530.In long term and medium term perspective this stock is a weak one. Investors may hold this scrip till it reaches resistance level of Rs. 570. Long term investors may avoid this stock till crude oil prices decline and over all demand for crude oil comes down.
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