Analyst Note| Joachim Kotze |
No-moat Ryanair reported an adjusted net loss of EUR 815 million for fiscal 2021, compared with EUR 1 billion profit in 2020, as passenger numbers tumbled by 81% to 27.5 million. Guidance for 80 million to 120 million passengers and break-even profit in 2022 is provided amid a highly uncertain environment. However, management remains optimistic about the group’s longer-term prospects, and maintains its 200 million passenger target for fiscal 2026. We believe the group is in a strong position to gain market share on intra-European flights, as multiple competitors fail or cut back capacity, and continue to reduce its cost base. Our forecasts assume the company achieves its longer-term guidance for passenger numbers, while the group EBIT margin expands to 18%, from 13.3% pre-COVID-19 levels, due to cost reductions. We expect to make slight changes to our forecasts, which will have a minimal impact on our EUR 14.50 fair value estimate. Shares appear fully valued, with the recovery, growth and margin expansion prospects fully discounted. We favour Wizz Air, which has a superior growth outlook and we believe is not fully appreciated by the market.