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India Equity Research Reports, IPO and Stock News
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H i g h e r f u e l c o s t s p o i l s t h e p i c t u r e …
SpiceJet’s revenues grew 33.5% YoY to | 748.7 crore during Q4FY11 on
account of an increase in the number of flights (up 34% YoY) to cater to
the healthy pax demand. However, the growth remained marginally
below our expectations (I-direct estimate: | 778.2 crore) on account of a
drop in yields due to the lean season. On the other hand, SpiceJet’s load
factor continued to remain healthy despite an increase in the number of
flights. It improved by 80 bps YoY to 79.6%. During the quarter, fuel
prices surged 29% YoY and 18% QoQ. This put a major dent on its
operating margins. As a result, the company posted an operating loss of |
79.2 crore as against an operating profit of | 10.7 crore last year.
ƒ Market share improves, margins decline on higher fuel prices
The company has been able to improve its market share by 220 bps
YoY to 13.9% on healthy pax traffic growth, especially in the LCC
segment. On the cost front, fuel prices recorded a sharp jump of
29% YoY. This, in turn, put pressure on operating margins as the
increased cost burden was not being fully passed on to consumers.
ƒ Load factor declines sequentially due to seasonality
The load factor for the quarter reported a sequential dip of 710 bps
on account of seasonality and increase in supply. However, the
same has improved by 80 bps compared to last year due to better
demand, despite a 34% increase in the available seat kilometre
(ASKM) and higher base of last year.
V a l u a t i o n
We like the company’s strategy of utilising its existing capacity optimally
and focusing more on new routes in Tier I and Tier II cities that have good
potential. The recent market correction has placed the stock at a good
entry level for investment. At the CMP of | 36, the stock is trading at 7.6x
and 5.8x its FY12E and FY13E EV/EBITDA, respectively. Though it seems
to be a very attractive price to buy, we recommend that our clients avoid
bottom fishing due to controversies related to alleged involvement of the
promoter group family in the 2G scam that are surrounding the stock.
Clients who have already invested may continue to hold the stock. We
value the stock at 7.5x FY13E EV/EBITDA and arrive at a target price of |
45 with a BUY rating on the stock
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
H i g h e r f u e l c o s t s p o i l s t h e p i c t u r e …
SpiceJet’s revenues grew 33.5% YoY to | 748.7 crore during Q4FY11 on
account of an increase in the number of flights (up 34% YoY) to cater to
the healthy pax demand. However, the growth remained marginally
below our expectations (I-direct estimate: | 778.2 crore) on account of a
drop in yields due to the lean season. On the other hand, SpiceJet’s load
factor continued to remain healthy despite an increase in the number of
flights. It improved by 80 bps YoY to 79.6%. During the quarter, fuel
prices surged 29% YoY and 18% QoQ. This put a major dent on its
operating margins. As a result, the company posted an operating loss of |
79.2 crore as against an operating profit of | 10.7 crore last year.
ƒ Market share improves, margins decline on higher fuel prices
The company has been able to improve its market share by 220 bps
YoY to 13.9% on healthy pax traffic growth, especially in the LCC
segment. On the cost front, fuel prices recorded a sharp jump of
29% YoY. This, in turn, put pressure on operating margins as the
increased cost burden was not being fully passed on to consumers.
ƒ Load factor declines sequentially due to seasonality
The load factor for the quarter reported a sequential dip of 710 bps
on account of seasonality and increase in supply. However, the
same has improved by 80 bps compared to last year due to better
demand, despite a 34% increase in the available seat kilometre
(ASKM) and higher base of last year.
V a l u a t i o n
We like the company’s strategy of utilising its existing capacity optimally
and focusing more on new routes in Tier I and Tier II cities that have good
potential. The recent market correction has placed the stock at a good
entry level for investment. At the CMP of | 36, the stock is trading at 7.6x
and 5.8x its FY12E and FY13E EV/EBITDA, respectively. Though it seems
to be a very attractive price to buy, we recommend that our clients avoid
bottom fishing due to controversies related to alleged involvement of the
promoter group family in the 2G scam that are surrounding the stock.
Clients who have already invested may continue to hold the stock. We
value the stock at 7.5x FY13E EV/EBITDA and arrive at a target price of |
45 with a BUY rating on the stock
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