JSC "Air Astana" has published its financial results for the fourth quarter of 2024. The report can be considered moderately positive, given the continued growth in quarterly revenue. Additionally, the EBITDAR margin has also increased compared to the previous year. Despite a decline in quarterly net profit, the company's cash flow generation remains strong. Partly due to the weakening of the tenge to USD, the company's cash balance at the end of the year reached a record high in its history. As a result, Air Astana's Board of Directors proposed dividends of 53.7 KZT per share. Moreover, the company has improved its dividend policy, which will provide investors with greater confidence regarding future dividend payments. The valuation model was adjusted slightly, with the primary change being an increase in the WACC due to the National Bank's base rate hike. The updated target price for an Air Astana share is 1,030 KZT, implying a 31% upside potential. Recommendation – "Buy."
(+) Revenue continues to grow. Air Astana's total quarterly revenue reached 157 billion KZT, 23% higher than in the same quarter of 2023. Since the third quarter is typically the strongest seasonally, total revenue in the fourth quarter declined by 20% quarter-on-quarter. FlyArystan continues to be the main driver of growth, with a 23% year-on-year increase in the fourth quarter, while Air Astana's revenue growth remained at 13% year-on-year. Overall, revenue growth was largely driven by a 16% increase in passenger transportation revenue. However, in the fourth quarter, the company recorded a one-time gain of 10 billion KZT from a saleand-leaseback transaction, which contributed significantly to the annual revenue increase. This profit was generated through the purchase of three spare engines and their immediate sale for 42.5 billion KZT with an eight-year leaseback. Charter flight revenue continued its strong growth, reaching 8.8 billion KZT, a 180% increase year-on-year. Regular flight revenue grew by 11% year-onyear, with the most significant increase of 35% year-on-year occurring in the "Asia and Middle East" route segment. Domestic route revenue also saw notable growth of 15% year-on-year, supported by FlyArystan, whose domestic revenue surged by 29%. In Kazakhstan overall, air passenger traffic grew by 8.4% in the fourth quarter of 2024. The company's passenger traffic growth in the fourth quarter was 6.9%, indicating a potential slight decline in its market share.
(+) Margin expansion and strong cash flow generation. Operating profit for the fourth quarter was 11.6 billion KZT, up 259% from the previous year. Excluding the one-time gain from the sale-and-leaseback transaction, profit would have decreased by 55% year-onyear. Airport handling and navigation costs increased by 16% yearon-year, passenger service expenses rose by 20% year-on-year, sales-related costs increased by 22% year-on-year, and personnel and crew expenses grew by 34% year-on-year. As a result, total operating expenses rose by 17% year-on-year, slightly outpacing the growth of regular revenue. The quarterly EBITDAR margin reached 22%, up from 18% in the previous year. For the full year 2024, excluding one-time gains and expenses, EBITDAR increased by 16% year-on-year in USD terms, with a margin of 25.9% compared to 25.1% the previous year. As a result, the quarterly net profit reached 771 million KZT, improving from a 1.8 billion KZT loss in 2023. Full-year 2024 earnings per share stood at 73 KZT (-27% year-on-year). Notably, strong cash flow generation continued in the fourth quarter. Free cash flow, including lease payments and saleand-leaseback proceeds, amounted to 17 billion KZT, significantly higher than the previous year's loss of 10.9 billion KZT. Consequently, the company's cash position significantly improved, partly due to the depreciation of the KZT. As of the end of 2024, the company's cash balance stood at 257 billion KZT, a record high.
Our opinion and valuation model changes. In our opinion, Air Astana's financial report can be considered moderately positive. Revenue growth continued in the fourth quarter, supported by charter operations. However, the company's passenger traffic growth slightly lagged behind the national average. The quarterly EBITDAR margin improved compared to the previous year. Including the sale-and-leaseback transaction, the company demonstrated strong free cash flow growth. As a result, the company's cash position reached a record level, prompting the Board of Directors to propose total dividends of 53.7 KZT per share. Notably, 36 KZT of this amount represents special dividends, a measure typically used to avoid inflating market expectations for future dividends. This suggests that investors can expect at least regular dividends of 17.7 KZT per share in subsequent years. Additionally, the company enhanced its dividend policy, increasing its payout ratio from "up to 20% of net profit" to "30-50% of net profit." The valuation model was adjusted slightly, primarily due to an increase in the weighted average cost of capital (WACC) following the National Bank's base rate hike. Other model updates reflect actual financial results. As a result, our updated target price for Air Astana's shares is 1,030 KZT, implying a 31% upside potential from the latest market price. Recommendation – "Buy."