SIA sinks 7% as analysts downgrade carrier on sharp Q1 profit drop
The counter dropped to S$6.94 as at 9.03 am - its lowest level in more than three weeks - with 2.6 million shares changing hands. It was down S$0.66 or nearly 8.7 per cent from Monday's closing price of S$7.60.
As at 2.30 pm, it had climbed back up to S$7.06, still down by 7.1 per cent or S$0.54 from Monday's close. With some 27.9 million shares transacted, it was one of the most heavily traded counters by volume on the Singapore Exchange.
SIA on Monday posted a 58.8 per cent decline in net profit, which fell to S$186 million for Q1 FY2026 ended Jun 30, from S$452 million in the year-ago period. The decline was due to lower interest income and share of losses of associates, SIA said.
Analysts from Maybank and CGS International (CGSI) on Monday downgraded their calls for SIA and slashed their price targets.
Maybank analyst Eric Ong downgraded the airline to 'sell' from 'hold' and lowered its target price to S$6.75 from S$6.85, noting that Air India losses weighed down SIA's earnings.
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CGSI analyst Raymond Yap downgraded SIA to 'reduce' from 'hold' and cut its target price to S$6.80 from S$6.88, recommending shareholders take profit while the carrier trades at a price-to-book-value of 1.45 times, which Yap described as 'very rich'.
DBS Group Research analyst Jason Sum, however, maintained a 'hold' call and raised SIA's target price to S$6.40 from $6.30. Sum cited expectations of SIA's core earnings normalising in FY2026 and eventually improving in FY2027, as well as potential tailwinds for the carrier.
Air India losses
Noting that SIA's earnings missed expectations due to the 'sizeable share' of its losses for Air India - which the group holds a 25.1 per cent stake in - Yap warned that its share of losses from the associated airline could widen.
Noting Air India's weak Q1 FY2026 results Yap said that its poor financial performance could persist moving forward, in light of flight cuts that followed the Jun 12 Ahmedabad plane crash - where a London-bound Air India passenger jet rammed into a medical college hostel minutes after take-off.
'While we think Air India's weak results for Q1 FY26 may have been due to one-off compensation provisions for the ... crash (its) subsequent financial performance may be weak,' Yap said.
He pencilled in SIA's share of losses for Air India at S$250m for FY2026 and S$200m for FY2027, wider than previous forecasts of S$75 million.
But a sharper-than-expected recovery for Air India could be an upside risk, he caveated.
DBS Group Research's Sum agreed that Air India would likely remain a 'near-term drag' for SIA as the airline navigates a complex restructuring alongside reputational damage.
Air India's bookings fell 20 per cent across domestic and international routes, with a noticeable rise in cancellations after the crash, Sum observed.
Cargo business
DBS Group Research's Sum and Maybank's Ong noted softening demand from SIA's cargo business amid trade disruptions and tariff uncertainty.
'Cargo demand appears to be under threat from the trade war (with) volume growth (having) declined to (a) 0.1 per cent year on year (increase) in Q4 FY2025,' Sum said.
Both noted that that front-loading activity had previously supported cargo demand as businesses pre-empted tariffs and rushed to boost inventories.
'We believe the uncertainty over how the Trump Administration's trade policies will evolve could hold back critical business decisions that drive economic activity, and with it the demand for air cargo going forward,' Ong said.
Ong added that cargo flown revenue had slipped 1.9 per cent year on year as yields deteriorated 4.4 per cent, which was 'worse than expected'.
Sum expects SIA's cargo yields to decline further, which will weigh on its cargo segment.
Potential tailwinds
Jetstar Asia's exit could provide 'modest relief' to competitive dynamics as Scoot, SIA's low-cost arm, battles intense pricing pressure, said DBS Group Research's Sum.
Maybank's Ong agreed that the Qantas-owned budget airline's closure could provide an opportunity for SIA to fill up the service gap left in its wake.
He noted that SIA will ramp up capacity to various Asian destinations across Malaysia, the Philippines, Sri Lanka and Thailand, after Jetstar Asia shutters on Jul 31.
Scoot will also commence operations to Labuan Bajo and Medan (Indonesia), as well as Okinawa (Japan), subject to regulatory and operational approvals, Ong said.
A more benign jet fuel environment could offset margin pressures for SIA, Sum said. He expects SIA to be able to manage costs well, given lower prices for jet fuel, which usually covers 20 to 30 per cent of operating costs.
Cost saving opportunities that have emerged and efficiency gains in customer service could provide further tailwinds for the airline, Sum added.
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