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SpiceJet Ltd - Strong performance on robust traffic…
SpiceJet’s revenues beat our expectation with 27.9% YoY growth to |
830.1 crore (I-direct estimate: | 808.4 crore) primarily driven by
sustained domestic demand (SpiceJet’s pax-traffic grew over 23.9%
YoY to ~20 lakh passengers). Also, the airline was able to maintain high
yield of | 3.5 (vs. | 3.3 in Q3FY10 and | 3.1 in Q2FY11). In Q3FY11,
SpiceJet’s load factor increased by 780 bps YoY to 86.7%. However, its
operating margin declined by 230 bps YoY to 13.7% in Q3FY11 (I-direct
estimate: 13.7%) on higher fuel costs. The company reported net profit
of | 94.4 crore (I-direct estimate: | 98.0 crore) that remained marginally
below our estimates on higher tax outgo.
ƒ Sustained pax-traffic growth leads to improvement in yields
SpiceJet reported a load factor of 86.7% (up from 78.9% in Q3FY10) on
strong pax traffic (RPKM increased by 23.9% YoY) and limited flight
additions (ASKM increased by 12.7% YoY) in the quarter. As a result, the
airline was successful in improving its pax-yields to | 3.5 during the
quarter (vs. ~| 3.3 in Q3FY10).
ƒ Margin declines on rise in fuel costs
The company’s operating margin declined by 221 bps YoY to 13.7% on
higher fuel costs (comprising over 40% of total operating costs), that
increased by over 50% compared to last year. However, its impact has
partially been negated by robust topline growth.
Valuation
We like the company’s strategy of utilising its existing capacity optimally
and focusing more on new routes that are having good potential in Tier I
and Tier II cities. The recent market correction has also placed the stock at
a good entry point level for investment. However rising ATF prices
remains a concern for the company going forward. At the CMP of | 58,
the stock is trading at 8.0x and 6.4x its FY11E and FY12E EV/EBITDA,
respectively. We have valued the stock at 8.0x its FY12E EV/EBITDA and
arrived at a target price of | 69. We downgrade our rating to BUY.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
SpiceJet Ltd - Strong performance on robust traffic…
SpiceJet’s revenues beat our expectation with 27.9% YoY growth to |
830.1 crore (I-direct estimate: | 808.4 crore) primarily driven by
sustained domestic demand (SpiceJet’s pax-traffic grew over 23.9%
YoY to ~20 lakh passengers). Also, the airline was able to maintain high
yield of | 3.5 (vs. | 3.3 in Q3FY10 and | 3.1 in Q2FY11). In Q3FY11,
SpiceJet’s load factor increased by 780 bps YoY to 86.7%. However, its
operating margin declined by 230 bps YoY to 13.7% in Q3FY11 (I-direct
estimate: 13.7%) on higher fuel costs. The company reported net profit
of | 94.4 crore (I-direct estimate: | 98.0 crore) that remained marginally
below our estimates on higher tax outgo.
ƒ Sustained pax-traffic growth leads to improvement in yields
SpiceJet reported a load factor of 86.7% (up from 78.9% in Q3FY10) on
strong pax traffic (RPKM increased by 23.9% YoY) and limited flight
additions (ASKM increased by 12.7% YoY) in the quarter. As a result, the
airline was successful in improving its pax-yields to | 3.5 during the
quarter (vs. ~| 3.3 in Q3FY10).
ƒ Margin declines on rise in fuel costs
The company’s operating margin declined by 221 bps YoY to 13.7% on
higher fuel costs (comprising over 40% of total operating costs), that
increased by over 50% compared to last year. However, its impact has
partially been negated by robust topline growth.
Valuation
We like the company’s strategy of utilising its existing capacity optimally
and focusing more on new routes that are having good potential in Tier I
and Tier II cities. The recent market correction has also placed the stock at
a good entry point level for investment. However rising ATF prices
remains a concern for the company going forward. At the CMP of | 58,
the stock is trading at 8.0x and 6.4x its FY11E and FY12E EV/EBITDA,
respectively. We have valued the stock at 8.0x its FY12E EV/EBITDA and
arrived at a target price of | 69. We downgrade our rating to BUY.
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