Equity | India | Airlines

Result Update
CMP (`) 21.35

Kingfisher Airlines Ltd.

November 15, 2011
Absolute Rating Not Rated

Q2FY12 - No longer The King of Good Times

Kingfisher Airlines (KFA) revenue grew 10.5% Y-o-Y to `15.28 bn, led by a 12.5% volume growth (RPKM) and a 1.5% decline in passenger yield (revenue/RPKM) to `4.58 (`4.66 in Q2FY12 and `5.14 in Q1FY12). The company reported an EBITDAR loss of `1.23 bn after two years, led by higher fuel prices. EBIDTA loss stood at `3.72 bn in Q2FY12 as compared to a loss of `786 mn in Q2FY11. The company reported a net loss of `4.69 bn in Q2FY12 as compared to a loss of `2.31 bn.

Market Info (as on 14th Nov 2011)

BSE Sensex Nifty S&P 17119 5148

Stock Detail
BSE Group BSE Code NSE Code Bloomberg Code Market Cap (`bn) Free Float (%) 52wk Hi/Lo Avg. Daily Volume (NSE) Face Value / Div. per share (`) Shares Outstanding (mn) B 532747 KFA KAIR IN 10.77 20% 81 / 17 7,579,838 10.00 / 0.00 497.8

Result Highlights
Revenues growth at 10.5%, load factors dropped Kingfisher Airlines (KFA) revenue grew 10.5% Y-o-Y to `15.28 bn, led by a 12.5% volume growth (RPKM) and a 1.5% decline in passenger yield (revenue/RPKM) to `4.58 (`4.66 in Q2FY12 and `5.14 in Q1FY12). The passenger load factor (PLF) declined to 75.6% in Q2FY12, compared to 79% in Q2FY12. The capacity (ASKM) grew 17.5% Y-o-Y. Domestic revenue grew 6% Y-o-Y to `12.5 bn, led by an 18% growth in RPKM and a 10% decline in passenger yield to `5.52. International revenue grew 11% Y-o-Y to `3.83 bn led by a 1.8% growth in RPKM and a 9.1% rise in passenger yield to `3.56. Domestic revenue accounted for 75% of the total revenue in the quarter Higher fuel prices hurt margins, Company reported EBITDAR loss after two years

Shareholding Pattern (in %)

Promoters 58.61 FIIs 2.11 DII 23.68 Others 15.60

The company reported an EBITDAR loss of `1.23 bn after two years led by higher fuel prices. EBIDTA loss stood at `3.72 bn in Q2FY12 as compared to a loss of `786 mn in Q2FY11. Domestic segment reported an EBITDA loss of `1.95 bn in Q2FY12 as compared to profit of `1.08 bn in Q2FY11 whereas International segment reported an EBITDA loss of `760 mn in Q2FY12 as compared to loss of `540 mn in Q2FY11. Other details The company reported other income of `1.02 bn in the quarter as compared to `1.33 bn in the same period last year. Tax write-backs stood at `2.25 bn in Q2FY12 compared to `1.32 bn in Q2FY11. The company reported a net loss of `4.69 bn in Q2FY12 as compared to a loss of `2.31 bn.

Share Price Performance

120 100 80 60 40 20 0 Nov-10 Jul-11 Mar-11 Dec-10 May-11 Oct-11 Nov-11 Apr-11 Aug-11 Jan-11 Jun-11 Feb-11 Sep-11

Valuation & viewpoint

We recommend a Sell on the stock in view of: a) uncertainty about debt restructuring b) sustainability of cash flows in times of rising fuel prices and consequently, c) a risk of further deterioration in the balance sheet to meet payment obligations. Quarterly Result Snapshot

Kingfisher Airlines

BSE SENSEX

Rel. Perf. Kingfisher (%) SENSEX (%)

1Mth (1.4) 4.0

3 Mths (26.0) 0.8

6Mths (50.0) (7.5)

1Yr (73.3) (16.5)

Y/E Mar `mn Net Sales EBITDA PAT EPS Margin Profile EBITDA Margin % PAT Margin%

Q2FY12 15,282 (3,720) (4,687) (9.4) (24.3)% (30.7)%

Q2FY11 13,827 (786) (2,309) (8.7)

% Chg YoY 10.5%

FY11 62,334 (1,219) (10,273) (20.6)

FY10 50,679 (8,993) (16,472) (61.9)

% Chg YoY 23.0%

Source: Company data, GEPL Capital Research

bps change YoY (5.7)% (16.7)% (1,866) (1,397) (2.0)% (16.5)% (17.7)% (32.5)%

bps change YoY 1,579 1,602

Source: Company data, GEPL Capital Research

Analyst
Sunil Sewhani

+91-22- 6614 2690 sunilsewhani@geplcapital.com

GEPL Capital Research

Equity | India | Airlines

Kingfisher Airlines Ltd.

Other Highlights
ASKM, RPKM and PLF
PLF declined 340 bps Y-o-Y to 75.6% led by a drop in domestic PLF as capacity grew by 17.5% Y-o-Y while demand grew by 12,5% Y-o-Y
mn

November 15, 2011

5,000 4,000 3,000 2,000 79.0

83.6 81.7

86.0 82.9 84.0 82.0 80.0 78.0 % 75.6 76.0 74.0 72.0 70.0

1,000 0 Sep-10 Dec-10

ASKM

Mar-11
RPKM

Jun-11

Sep-11

Load Factor

Source: Company data, GEPL Capital Research

Cost per ASKM (with fuel and without fuel)

5.00 4.17 4.32 4.30

Cost per ASKM with fuel rose by 11% Y-o-Y even as the Cost per ASKM without fuel decline by 3& Y-o-Y highlight the negative impact of the fuel rise

4.00 3.00 2.00

3.89

3.94

1.94 1.00 0.00 Sep-10

1.99

1.99

1.84

1.89

Dec-10

M ar-11

Jun-11

Sep-11

Cost per ASKM (with fuel) Cost per ASKM (without fuel)
Source: Company data, GEPL Capital Research

EBITDAR and EBITDAR margin

3,500 3,000 2,500 2,000 1,500 Rs 1,000 500 (500) (1,000) (1,500) (8.1) Sep-10 Dec-10 M ar-11 Jun-11 Sep-11 EBITDAR
Source: Company data, GEPL Capital Research

25.0 19.2 12.5 11.8 20.0 15.0 10.0 3.0 5.0 (5.0) (10.0) %

The company reported an EBITDAR loss for the first time in the last eight quarters due to higher fuel prices

EBITDAR M argins

GEPL Capital Research| Q2FY12 Result Update

Equity | India | Airlines

Kingfisher Airlines Ltd.

Quarterly Financial Table
Y/E March `mn Revenue Other Operating Income Total Revenue EBITDA EBITDA Margin % Depreciation EBIT EBIT Margin % Financial Charges Other Income Exceptional Items PBT PBT Margin % Tax Tax Rate PAT PAT Margin % Extraordinary Income PAT After Extraordinary Income EPS
Source: Company data, GEPL Capital Research

November 15, 2011

Q2FY12 15,282 0 15,282 (3,720) (24) 785 (4,505) (29) 3,344 1,021 (110) (6,937) (45) (2,251) 32 (4,687) (31) 0 (4,687) (9.4)

Q2FY11 13,827 0 13,827 (786) (6) 530 (1,316) (10) 3,623 1,329 (15) (3,624) (26) (1,315) 36 (2,309) (17) 0 (2,309) (8.7)

% Chg YoY 10.5% 10.5%

Q1FY12 18,816 0 18,816 (247) (1)

% Chg QoQ (18.8)% (18.8)%

FY11 62,334 0 62,334 (1,219) (2)

FY10 50,679 0 50,679 (8,993) (18) 2,173 (11,166) (22) 10,965 2,031 (4,079) (24,179) (48) (7,707) 32 (16,472) (33) 0 (16,472) (61.9)

% Chg YoY 23.0% 23.0%

48.2%

865 (1,113) (6)

(9.3)%

2,410 (3,630) (6)

10.9%

(7.7)% (23.2)%

3,058 294 (24) (3,901) (21) (1,266) 32 (2,635) (14) 0 (2,635) (5.3)

9.3% 247.7%

13,129 2,622 (1,071) (15,208) (24) (4,935) 32 (10,273) (16) 0 (10,273) (20.6)

19.7% 29.1%

Operational Cost-Common Size

Y/E March `mn Fuel Cost % of Total Revenue Staff Cost % of Total Revenue Landing, navigation etc % of Total Revenue Other expenses % of Total Revenue Total Expenditure
Source: Company data, GEPL Capital Research

Q2FY12 8,168 53.5 1,832 12.0

Q2FY11 4,800 34.7 1,725 12.5

% Chg YoY 70.2%

Q1FY12 8,451 44.9

% Chg QoQ (3.4)%

FY11 22,740 36.5

FY10 18,030 35.6 6,888 13.6

% Chg YoY 26.1%

6.2%

1,737 9.2

5.5%

6,760 10.8

(1.9)%

0.0 6,513 42.6 16,513

0.0 5,568 40.3 12,093 36.6% 17.0%

0.0 6,403 34.0 16,591 (0.5)% 1.7%

0.0 24,213 38.8 53,713

0.0 23,817 47.0 48,735 10.2% 1.7%

GEPL Capital Research| Q2FY12 Result Update

Equity | India | Airlines

Kingfisher Airlines Ltd.

NOTES

November 15, 2011

GEPL CAPITAL Pvt Ltd (formerly known as Gupta Equities Pvt. Ltd.) Head Office: D-21/22 Dhanraj mahal, CSM Marg, Colaba, Mumbai 400001 Reg. Office : 922-C, P.J. Towers, Dalal Street, Fort, Mumbai 400001 Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report: Name : Sunil Sewhani Sector : Airlines Disclaimer: This report has been prepared by GEPL Capital Private Limited ("GEPL Capital "). GEPL Capital is regulated by the Securities and Exchange Board of India. This report does not constitute a prospectus, offering circular or offering memorandum and is not an offer or invitation to buy or sell any securities, nor shall part, or all, of this presentation form the basis of, or be relied on in connection with, any contract or investment decision in relation to any securities. This report is for distribution only under such circumstances as may be permitted by applicable law. Nothing in this report constitutes a representation that any investment strategy, recommendation or any other content contained herein is suitable or appropriate to a recipients individual circumstances or otherwise constitutes a personal recommendation. All investments involve risks and investors should exercise prudence in making their investment decisions. The report should not be regarded by the recipients as a substitute for the exercise of their own judgment. Any opinions expressed in this report are subject to change without notice and may differ or be contrary to opinions expressed by other business areas or groups of GEPL Capital as a result of using different assumptions and criteria. GEPL Capital is under no obligation to update or keep current the information contained herein. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Options, derivative products and futures are not suitable for all investors, and trading in these instruments is considered risky. Past performance is not necessarily indicative of future results. Foreign currency rates of exchange may adversely affect the value, price or income of any security or related instrument mentioned in this report. Any prices stated in this report are for information purposes only and do not represent valuations for individual securities or other instruments. There is no representation that any transaction can or could have been effected at those prices and any prices do not necessarily reflect GEPL Capitals internal books and records or theoretical model-based valuations and may be based on certain assumptions. Different assumptions, by GEPL Capital or any other source may yield substantially different results. GEPL Capital makes no representation or warranty, express or implied, as to, and does not accept any responsibility or liability with respect to, the fairness, accuracy, completeness or correctness of any information or opinions contained herein. Further, GEPL Capital assumes no responsibility to publicly amend, modify or revise any forward-looking statements, on the basis of any subsequent development, information or events, or otherwise. Neither GEPL Capital nor any of its affiliates, directors, employees or agents accepts any liability for any loss or damage arising out of the use of all or any part of this report. In no event shall GEPL capital be liable for any direct, special indirect or consequential damages, or any other damages of any kind, including but not limited to loss of use, loss of profits, or loss of data, whether in an action in contract, tort (including but not limited to negligence), or otherwise, arising out of or in any way connected with the use of this report or the materials contained in, or accessed through, this report. GEPL Capital and its affiliates and/or their officers, directors and employees may have similar or an opposite positions in any securities mentioned in this document (or in any related investment) and may from time to time add to or dispose of any such securities (or investment). The disclosures contained in the reports produced by GEPL Capital shall be strictly governed by and construed in accordance with Indian law. GEPL Capital specifically prohibits the redistribution of this material in whole or in part without the written permission of GEPL Capital and GEPL Capital accepts no liability whatsoever for the actions of third parties in this regard.

GEPL Capital Research| Q2FY12 Result Update