Swiss investment bank Credit Suisse has released a Pegasus (PGSUS) report for its clients today. The bank went up for the PGSUS stock target price.
Here are the highlights from the report:
We are revising our 2023 EBITDA margin forecast slightly upwards before 2Q (from 33.5 percent to 35.2 percent). Our positive EBIT is largely offset by the assumptions of rental costs and a higher tax rate on the bottom line. Based on the valuation, we still like PGSUS as the company maintained its high share of FX-based revenues and management’s successful growth strategy, increasing margins. We reiterate our “Performance” rating with a new target price of TRY848 (formerly TRY683.80) from TRY683.80.
Q2 preview: Based on previously reported passenger numbers, 1) we are looking for -7% passenger yield/km per year (in EUR), a trend resistant to 27 percent capacity increase in the quarter and potential TRY dilution from local routes, 2) +5 -12% overall reduction in unit cost (CASK) excluding fuel %; this difference is due to a recent positive drop in jet fuel-Brent cracks.
We do not expect any significant change in guidance for the full year following the results, but we are about 5.2 percentage points above the low of the 30+% EBITDA margin outlook.
revisions: CSe 2023E earnings forecast: EUR468m (1 percent below previous EUR474m). We reflect low jet fuel cracks and continued strength in high margin ancillary revenues. With the EUR:US$ rate, we add potentially higher FX gains in 3Q. Our 3 percent EBITDA increase for the ’23 balances with our conservative lease rate and tax assumptions, leaving a potential increase in earnings. We’re converting our EUR-based valuation to TRY-based and taking into account the recent EUR appreciation, we’re raising it to 32 (compared to the previous 26), which is a high forward-EUR:TRY estimate.
Catalysts: Completion of the second runway at the main hub (SAW Airport) (CSe: 4Q23). 2Q results will be released on 14 August, followed by QTD trends in EURUS$ on top of the quarter’s positive seasonality, 3Q results pointing to potential FX gains will be released on 8 November.
Risks include main competitor THY’s expansion of its low-cost brand presence in SAW and the reversal of recent tightening in the jet fuel-Brent cracks.
Valuation: Stocks are at 5.0x on the 12-month forward P/E multiplier based on our revised earnings and EUR:TRY estimates.
The institution, which set a target price of 683.80 TL for the PGSUS share price in the previous report, increased this target price to 848 TL in this report.
On the other hand, PGSUS shares are still trading at levels close to 719 TL. While Credit Suisse explains that if its predictions, which it calls the blue sky projection, are true, the target price for PGSUS shares is 1065 TL, it predicts 573 TL as the target price in case of the scenario called gray sky.
So what are these Blue Sky and Gray Sky projections?
Blue Sky projection
The Blue Sky projection is based on the following assumptions (analyst quoted): 2022-2025E capacity (ASK) growth is 19 percent annually (base scenario: 16 percent), average occupancy is 86.2 percent (base scenario: 85.2 percent), and CSe EBITDA margin is 37.7 percent (base scenario). scenario: 34.5 percent. In this scenario, we use target multipliers 5 percent higher to account for a potential revaluation situation.
Gray Sky projection
The Gray Sky projection includes the following assumptions: 2022-2025E capacity (ASK) growth is 14 percent annually (base scenario: 16 percent), average occupancy rate is 83.9 percent (base scenario: 85.2 percent), and CSe EBITDA margin is 29.5 percent (base scenario: percent). 34.5). In this scenario, we use target multipliers 10 percent lower to account for a potential revaluation situation.
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