Singapore Airlines Earnings: Record Half-Year Profit, FVE Raised but Profit Outlook Is Dimming

We raise our fair value estimate on Singapore Airlines, or SIA, to SGD 7.70 from SGD 7.20 as we lift our fiscal 2026-28 earnings outlook on a higher load factor assumption that offsets a cut to our fiscal 2024-25 profit forecasts. SIA’s record fiscal 2024 (ending March) interim net profit of SGD 1.441 billion is in line with our original full-year projection, but we now expect a weaker second-half performance with higher jet fuel costs and weaker yields. SIA’s shares are currently undervalued having retreated from its 52-week high of SGD 8.05 set on June 19. For longer-term investors willing to sit through the oil price gyrations, we think select airlines, such as SIA, are attractive but fiscal 2024 is a likely profit peak. Our fair value estimate factors in a normalization in profitability to prepandemic levels, leading to three-year EPS CAGR of negative 5% given the high base in fiscal 2023.