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Aeroflot posted an improvement of its key financials in 9M2007 amid the active growth if the Russian air transportation market and on the back of efficient opex controls. We believe that the released report would contribute to upbeat sentiments in the market, however, we note that the sharp price growth for aircraft fuel in 4Q 2007 might have negative implications for FY 2007 results of the company.
On January 30 Aeroflot released its key financials for the first 9 months 2007. The company managed to improve its revenue by over 30%. EBITDA doubled compared to 2006 to USD 630.5 mn, net profit grew y-o-y by 91.7% to USD 357.3 mn. According to Aeroflot's management estimates these robust financial results were achieved due to efficient opex controls and favorable conditions in the sector. The carried passengers numbers rose by over 16%.
Table 1. Aeroflot: 9M 2007 results
| Indicator | 3Q 2007 ($ mn.) | 3Q 2006 ($ mn.) | Change (%) |
|---|
| Revenue | 2,797.9 | 2,121.2 | 31.9% | | Operating expenses | 2,280.2 | 1,879.4 | 21.3% | | EBITDA | 630.5 | 318.3 | 98.9% | | Net profit | 357.3 | 186.4 | 91.7% |
Source: Company data, FINAM
We would like to underline that in the reported period, the company managed to considerably improve its business efficiency. While the growth of revenue was expected and attributable mainly to the market conditions, the margins gave a nice surprise. EBITDA margin grew from 15% to 22.5% and net margin increased from 8.8% to 12.8%. Based on our estimates, the company managed to increase margins mainly due to the efficient control of the aircraft fuel costs which account for more than one third of the total operating expenses.
We are upbeat on 9M 2007 results posted by the company. However, we note that sharp growth of prices for aircraft fuel in 4Q 2007 might have negative implications for Aeroflot's FY 2007 results. The fair value of Aeroflot is USD 3.51 per share. This implies 5% downside. Vladimir Sergievskiy
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Aeroflot
Capitalization: $1 899 153 871,29
Common shares:
Price: $1,71
Delta week: -6,4%
Delta month: -22,7%
Delta year: -52,0%
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0.553
1.6
