10:30 AM EDT, 09/28/2022 (MT Newswires) -- Cargojet Inc.'s (TSX: CJT) financial targets for 2026 look achievable with growth to be supported by the expansion of its fleet, National Bank of Canada said in a note.
The bank, which participated in Cargojet's Investor Day on Tuesday, noted that the air cargo service provider is targeting revenue of $1.3-$1.4 billion for 2026. It also noted that Cargojet is aiming for adjusted EBITDA of $500-$550 million, and adjusted free cash flow (before growth capex) of $320-$360 million.
The low end of the revenue range for 2026 implies growth of about 10% per year beyond 2023, with margins that are only slightly higher than what it forecasts for 2023, the bank said.
The bank said the growth will be supported by the expansion of Cargojet's fleet from 40 planes at the end of 2022 to a planned 51 over the next four-five years.
The bank noted that Cargojet has good visibility on projected growth over the next several years. It said that, regardless of the economic backdrop, Cargojet will see growth in its ACMI (aircraft, crew, maintenance and insurance) business as new aircraft are deployed with DHL under the new long-term contract signed earlier this year.
Another important takeaway, the bank said, is the fact that Cargojet has a dominant and defensible market position with about 90% share of overnight cargo in Canada, supported by very sticky customers. It noted that Cargojet's operational hub is at the Hamilton Airport and its core customers such as DHL, Amazon, UPS and Purolator also have large facilities at the airport.
The bank said that the company was well positioned should a downturn materialize. It noted that all the company's long-term contracts have minimum volume guarantees that protect revenue on the downside. It also noted that liquidity is comfortable and that, in a worse-case scenario, the company has flexibility to defer $150 million in capex.
National Bank maintained its Sector Perform rating on Cargojet with a target price of $158.00.
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