Fading competitive intensity due to the departure of Jet Airways has led to meaningful improvement in yield within the industry and Interglobe Aviation (IndiGo), the leader in the space, has taken advantage of the same and reported the highest ever quarterly profit in Q1 FY20. Strong revenue growth coupled with higher operating profit helped company post strong profits.
We continue to have positive outlook on the business and believe that the changing industry dynamics would help the company grow and cope up with the volatility in oil prices as yields are higher. We advise investors to accumulate the stock for the long term.
Net revenue from operations witnessed a significant growth of 44.7 percent on year-on-year (YoY) basis. The growth was driven by 30.2 percent YoY growth in revenue passenger kilometres (RPK) and improvement in yield, which grew 12.7 percent. Yield witnessed improvement due to the Jet Airways fiasco that reduced competition from the industry. The management highlighted that the fares are higher in 0-15 days window as well.
With significant improvement in yield and increase in RPK, the company posted a YoY growth of 145.9 percent in earnings before interest, tax, depreciation, amortisation and rental (EBITDAR) and EBITDAR margin witnessed a YoY expansion of 1,214 bps in Q1 FY19.
Load factor remained largely same at 88.9 percent in Q1 FY20 and the company witnessed significant capacity addition of 30.9 percent YoY.