Topic: FWAG released record Q3 results and strong October traffic results, showing excellent operating performance throughout the summer as well as a strong start into Q4.

Q3 sales came in strong at € 271m, +27% yoy (eNuW: € 267m; eCons: € 262m) thanks to superb passenger growth in the summer (Q3: 12m group passengers, + 14% yoy; 100% of 2019 levels) coupled with the increase of passengers and aircraft fees of +5.8% as of Jan. '23.

EBITDA grew by +57% yoy to € 155m (57% EBITDA margin, +4.6pp yoy), far better than our and market expectations (eNuW: € 131m; eCons: € 133m) due to much lower than expected OpEx of € 119m (eNuW: € 137m), especially due to lower personnel costs of € 79m (eNuW: € 89m).

Given FWAG’s huge cash storage in short-term deposits of eNuW: € 498m, the company's financial result turned positive at € 1.7m (vs. € -2.6m in Q3’22), leaving a positive mark on the bottom line. Hence, net income (after minorities) stood at € 83m, up 62% yoy (30% profit margin). This marked a new Q3 record for FWAG (old: € 64m in Q3’22).

Moreover, FWAG now operates with an industry leading net cash position of € 299m, giving the company a solid basis for current CAPEX projects, while not endangering the dividend capability. For FY'23e, the company intends to raise the pay-out ratio “above 60%” (eNuW: 70%). While we estimate EPS to grow by 57% yoy, the FY'23e dividend should grow by 83% yoy to € 1.40 per share.

Also, October traffic results came in better than expected at 3.5m group passengers (eNuW: 3.3m; +16% yoy; 99% of 2019 levels). Hence, we increase our estimate for FY’23e to 37.7m (old: 37.4m). The guidance of >36.5m seems unambitious and should be outperformed, in our view (see p. 2).

The strong growth rates from the perfectly executed COVID recovery in FY’23e should however normalize in FY'24e, as this year's strong passenger momentum seems hard to be maintained next year. However, the passengers and aircraft fees (eNuW: 42% of FY'23e sales) should increase by 9.7% (as of Jan. '24), which should support top-line growth even with flat passenger numbers.

As a consequence, we reiterate our HOLD recommendation with an increased PT of € 46.00 (old: € 45.00), based on FCFY'24e.