Launch Of Noida International Airport In 2025 Will Expand Aviation Operations

Key Takeaways

• Expansion projects and new commercial offerings are poised to significantly boost aviation and commercial revenue by 2027.
  
• New economic mechanisms and partnerships with airlines are enhancing aviation revenue and stabilizing regulatory risks.
  
• Delays and costs from projects, regulatory uncertainty, and increased CapEx needs could impact revenue, profit margins, and cash flow negatively.

Catalysts

Owns and operates the Zurich Airport in Switzerland.

• The upcoming commencement of operations at Noida International Airport in April 2025, along with the completion of major projects like the baggage sorting system at Zurich Airport, are expected to boost aviation revenue and overall earnings significantly.
  
• Expansion and enhancement of the commercial and real estate segments, such as the landside passenger areas and new retail offerings, could increase commercial turnover and contribute to revenue growth post-completion in 2027.
  
• The introduction of new economic mechanisms like the roll-over tariff mechanism and the potential for adjusted flight operation charges may stabilize and potentially increase aviation revenue, reducing regulatory risks.
  
• Growth in passenger and freight volumes, especially with new routes and partnerships with airlines like IndiGo and Akasa Air, are likely to enhance aviation revenue and overall profitability.
  
• Optimization and innovation initiatives, like the innovation hub and partnership agreements with Swiss and Swissport, could lead to increased efficiency and potentially improved net margins over time.

Flughafen Zürich Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Flughafen Zürich's revenue will grow by 5.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 24.6% today to 24.8% in 3 years time.
• Analysts expect earnings to reach CHF 370.6 million (and earnings per share of CHF 11.83) by about February 2028, up from CHF 317.9 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 22.3x on those 2028 earnings, up from 21.2x today. This future PE is greater than the current PE for the GB Infrastructure industry at 21.2x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.98%, as per the Simply Wall St company report.

Flughafen Zürich Future Earnings Per Share Growth

Risks

• The delay in the opening of Noida International Airport from its original schedule to April 2025 and the associated construction challenges could impact future revenue streams and increase costs, affecting earnings.
  
• Substantial cost pressures in the first half of 2024, with operating expenses rising by 12% and personnel expenses by 15%, could squeeze profit margins and impact net margins negatively.
  
• The ongoing construction projects at Zurich Airport, expanding landside passenger areas, could potentially disrupt retail operations, impacting commercial revenues temporarily.
  
• Regulatory uncertainty around tariff adjustments and the possibility of a reduction in tariffs due to high earnings coverage could impact future revenue and cash flow planning.
  
• Increased CapEx needs, particularly for international projects like Noida and new expansions, may lead to a rise in net financial debt and affect free cash flow generation.

Valuation

• The analysts have a consensus price target of CHF231.938 for Flughafen Zürich based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CHF270.0, and the most bearish reporting a price target of just CHF181.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be CHF1.5 billion, earnings will come to CHF370.6 million, and it would be trading on a PE ratio of 22.3x, assuming you use a discount rate of 6.0%.
  
• Given the current share price of CHF220.0, the analyst price target of CHF231.94 is 5.1% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.