Aviation and Renewables Sector Update : Q1FY27 preview - Mixed performance by Emkay Global Financial Services Ltd
The aviation sector was hit hard in 1QFY27 by the Middle East conflict, which led to higher fuel prices and international sector disruptions. Indigo is, however, expected to report positive earnings, as forex losses seem unlikely, with the rupee closing slightly stronger between the two quarter ends. In the renewable energy space, among our coverage, Adani Green is likely to log strong volume growth and earnings on the back of capacity growth and a seasonally supportive quarter. Waaree Energies, in our view, should report range-bound earnings with stable margins
Interglobe Aviation - Higher yields to partly offset elevated fuel costs
We estimate Indigo’s yields to increase 14% yoy to Rs5.7, supported by fuel surcharges and higher airfares amid the Middel East conflict. However, the sharp increase in crude oil prices and jet fuel cracks is expected to drive up fuel cost/ASK by 45% qoq. ASK growth is likely to moderate to 4% yoy (flat qoq) at 43.7bn, owing to airspace restrictions, while PLFs are expected to improve by ~40bps yoy to ~85.0%, resulting in RPK growth of 4% yoy to 37.2bn (down 1% qoq). PBT/ASK (ex-forex) is expected to decline 56% yoy to Rs0.25, with net profit at Rs11.5bn (vs Rs21.6bn yoy), primarily due to elevated fuel costs.
Adani Green Energy - Higher power sales and improved realization to drive earnings
We estimate power sales to increase 25% yoy/31% qoq in 1QFY27E, supported by capacity expansion to 20.1GW from 19.3GW between the two quarter-ends, along with sequential improvement in CUFs. Merchant tariff rates have also improved, with overall book realization expected to improve 3% qoq to Rs3.2/kWh. We estimate consolidated EBITDA to increase 32% yoy and 39% qoq to Rs40.1bn, while APAT is expected to rise 46% yoy to Rs10.6bn
Waaree Energies - Range-bound numbers; cell production to rise We estimate Waaree Energies’s consolidated revenue to decline 7% qoq to Rs78.6bn in 1QFY27E, owing to lower module production, a marginal decline in module realizations, and lower EPC runrate. Revenue yoy is likely to be up 78%. EBITDA margin, in our view, would be stable qoq at ~19%, supported by higher cell utilization and production. We estimate consolidated EBITDA/APAT to be down 3%/10% qoq to Rs15.3/9.5bn in 1QFY27.
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