{"id":324992,"date":"2023-09-21T01:47:23","date_gmt":"2023-09-20T17:47:23","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=324992"},"modified":"2023-09-21T01:47:25","modified_gmt":"2023-09-20T17:47:25","slug":"stock-in-focus-cebu-pacific-cebu-air-inc-ceb-21-sept-2023-by-ap-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-cebu-pacific-cebu-air-inc-ceb-21-sept-2023-by-ap-securities\/","title":{"rendered":"Stock in Focus: Cebu Pacific \/ Cebu Air Inc. (CEB) – 21 Sept 2023 by AP Securities"},"content":{"rendered":"\n

Summary of Broker’s Recommendation<\/h2>\n\n\n\n
Stock Code<\/strong><\/td>CEB<\/td><\/tr>
Company Name<\/strong><\/td>Cebu Air Inc.<\/td><\/tr>
Broker<\/strong><\/td>AP Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>21 Sept 2023<\/td><\/tr>
Recommendation<\/strong><\/td>Hold<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 53.00<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
<\/div>\n\n\n\n

While we see a marked improvement in CEB\u2019s revenues if we compare to 2020-2022, the airline is still flying at a slightly lower altitude than it was in 2019 in terms of revenues and number of flights. The latest issues with its Airbus aircraft would likely throw a wrench into the company\u2019s grand ambitions to return to its pre-pandemic glory if around a third of its fleet gets grounded for inspection for 300 days. As such, we feel that the consensus Target Price of P53.00 per share may be overpriced and that CEB\u2019s current price already reflects most of its growth prospects for this year and the next.<\/p>\n\n\n\n

<\/div>\n\n\n\n

Analysis and Opinion<\/h2>\n\n\n\n

Pratt & Whitney warns of more aircraft grounding<\/strong><\/p>\n\n\n\n

In July of this year, jet engine maker Pratt & Whitney disclosed that a previously-undetected contaminant in the metal powder used in its Geared Turbofan series has caused a defect that may lead to micro-cracks and fatigue in some engine parts. This has prompted the company to call for accelerated inspections which has so far affected 200 aircraft worldwide and affected operations of airlines, primarily budget airlines that favor the Airbus A320neo and A321neo jets. <\/p>\n\n\n\n

Earlier this week, Pratt & Whitney announced that the estimated number of aircraft that need to be grounded for inspection has risen to 600-700 and inspections may take as long as 300 days per engine, as compared to the previous estimate of 60 days. The company further announced that this disruption may stretch through to 2026, with as many as 650 aircraft grounded in the first half of 2024.<\/p>\n\n\n\n

CEB makes downward revisions to 2024 growth<\/strong><\/p>\n\n\n\n

In a disclosure to the PSE, CEB said that it has been notified by Pratt & Whitney that some of its aircraft will be affected by the accelerated inspection program. Without providing actual figures, the airline said that this will affect its fleet availability in 2024 and it is revising its growth expectations for next year downwards. CEB has a total fleet size of 76 aircraft, with 15 aircraft expected for delivery next year. Of this count, 25 jets are equipped with Pratt & Whitney engines.<\/p>\n\n\n\n

More headwinds and turbulence ahead<\/strong><\/p>\n\n\n\n

We started the year with very high expectations from CEB as we see the tourism sector primed for resurgence in the post-pandemic era. However, numerous headwinds have emerged for the airline industry, among which are high fuel prices and supply chain issues. Chinese tourists are also not arriving in droves as previously expected, as they choose to travel to other destinations.<\/p>\n\n\n\n

<\/div>\n\n\n\n

Check how many brokers recommend this stock<\/h2>\n\n\n\n
\n
All Stock Rankings<\/a><\/blockquote>