KGI Maintains AAV’s Rating as ‘Outperform’, Expecting Continuous Growth in Core Earnings

KGI Securities maintained an ‘Outperform’ rating for AAV following a robust performance in 1Q24, as the company posted a normalized profit of THB 1.64 billion, marking a significant improvement from the normalized loss of THB 169 million in 1Q23 and the normalized profit of THB 1.06 billion in 4Q23. The positive results were driven by effective control of SG&A expenses.

The analyst anticipated that 2Q24F earnings may experience a slight decline compared to the previous quarter, attributed to the typically slower tourism season. Nevertheless, year-on-year earnings are expected to show considerable improvement from the loss reported in the second quarter of 2023, fueled by a rise in the number of international tourists.

Meanwhile, AAV expected a decline in its capacity to 84% and 88% in 2Q24F and 3Q24, respectively, before rebounding to 99% in 4Q24. The airline anticipated that fares would continue to be robust, mainly due to high fuel costs, limited new aircraft available for airlines, and solid demand in the market. AAV projected that the average fare would be higher than previously expected, reaching THB 1,780 per ticket in 2024, compared to THB 2,109 per ticket in 1Q24.

In line with its growth strategy, AAV aims to bolster aircraft utilization to 57 planes by the end of the year, up from the current 50 aircraft. This initiative is intended to support the ongoing recovery in passenger numbers as the aviation industry continues its rebound.

KGI expected AAV to continue showing strong core earnings over the next few years, while also noting that the net profit could be volatile from the movement of THB against USD.

The firm raised AAV’s normalized earnings projections by 40.5% to THB 2.22 billion for 2024F and 7.6% to THB 2.49 billion for 2025F and maintained an ‘Outperform’ rating, with a target price of THB 3.20.