Singapore Air Earnings: Record-High Fiscal 2023 Net Profit Within Expectation; Lift FVE to SGD 6.10

No-moat Singapore Airlines delivered a record-high net profit of SGD 2.2 billion for fiscal 2023 ending March, in line with our expectations. SIA definitely benefited from having a relatively intact flight crew and a healthy balance sheet able to capture the rebound in travel demand. We push back assumptions of a normalization in passenger yield and load factor into fiscal 2025, lifting our earnings estimates. However, our thesis that competition will resume is unchanged as airlines add capacity and we expect SIA’s operating margin to decline to a midcycle 5.1% in fiscal 2028, from 15.6% in fiscal 2023. Our midcycle margin forecast is close to SIA’s 2005-20 average. Our fair value estimate rises to SGD 6.10 from SGD 5.30. We continue to prefer greater upside potential from its current share price before buying the shares, but near-term performance should remain supportive for its share price.