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N a s t i e s t q u a r t e r …
SpiceJet’s revenues grew 21.8% YoY to | 766.4 crore during Q2FY12 on
account of an increase in the number of flights (up ~33% YoY). However,
the growth remained lower than the rise in the number of flights due to a
sharp drop in yields (due to competition) and lower load factor (due to
lean season and increase in the capacity). Its load factor and yield
declined by1099 bps on account of an increase in capacity, although its
market share improved 80 bps YoY to 13.6%. Fuel costs during Q2FY12
were 83% higher than same period last year and fuel cost constituted
48% of the total operating costs in Q2FY12 as compared to 41% in
Q2FY11. This, in turn, put a major dent on its operating margins. Hence, it
posted a loss of | 240 crore vs. profit of | 10.1 crore last year.
ƒ Market share improves but operating loss widens on increase in
capacity, higher fuel prices
The company’s market share for the quarter increased 80 bps YoY
mainly due to 33% increase in its capacity. As a result, it has been
able to post revenue growth of over 21% YoY vs. industry growth of
9% YoY. On the cost front, fuel prices recorded a sharp jump of
83% YoY. This, in turn, put pressure on its operating margin as the
increased cost burden was not being fully passed on to consumers
during the quarter due to the competitive environment.
ƒ Load factor declines sequentially due to rise in capacity
During the quarter, there has been an increase of over 33% YoY in
the company’s domestic flights on account of addition of eight
aircraft in the last quarter. Due to this surge in capacity, the load
factor for the quarter declined sharply by 1099 bps YoY while pax
traffic continued to grow at an average rate of 16% YoY.
V a l u a t i o n s
We have revised our FY12E loss forecast upwards taking into account the
current quarter’s dismal performance. However, we believe the domestic
environment for the aviation space should improve from the next quarter
onwards as the sector is heading into the peak season with limited
supply. However, higher fuel prices and irrational pricing environment
remains a concern over the medium term. Hence, we remain cautiously
positive on the stock and maintain a price target of | 28 (i.e. 0.4x FY13E
EV/Sales) with a BUY rating.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
N a s t i e s t q u a r t e r …
SpiceJet’s revenues grew 21.8% YoY to | 766.4 crore during Q2FY12 on
account of an increase in the number of flights (up ~33% YoY). However,
the growth remained lower than the rise in the number of flights due to a
sharp drop in yields (due to competition) and lower load factor (due to
lean season and increase in the capacity). Its load factor and yield
declined by1099 bps on account of an increase in capacity, although its
market share improved 80 bps YoY to 13.6%. Fuel costs during Q2FY12
were 83% higher than same period last year and fuel cost constituted
48% of the total operating costs in Q2FY12 as compared to 41% in
Q2FY11. This, in turn, put a major dent on its operating margins. Hence, it
posted a loss of | 240 crore vs. profit of | 10.1 crore last year.
ƒ Market share improves but operating loss widens on increase in
capacity, higher fuel prices
The company’s market share for the quarter increased 80 bps YoY
mainly due to 33% increase in its capacity. As a result, it has been
able to post revenue growth of over 21% YoY vs. industry growth of
9% YoY. On the cost front, fuel prices recorded a sharp jump of
83% YoY. This, in turn, put pressure on its operating margin as the
increased cost burden was not being fully passed on to consumers
during the quarter due to the competitive environment.
ƒ Load factor declines sequentially due to rise in capacity
During the quarter, there has been an increase of over 33% YoY in
the company’s domestic flights on account of addition of eight
aircraft in the last quarter. Due to this surge in capacity, the load
factor for the quarter declined sharply by 1099 bps YoY while pax
traffic continued to grow at an average rate of 16% YoY.
V a l u a t i o n s
We have revised our FY12E loss forecast upwards taking into account the
current quarter’s dismal performance. However, we believe the domestic
environment for the aviation space should improve from the next quarter
onwards as the sector is heading into the peak season with limited
supply. However, higher fuel prices and irrational pricing environment
remains a concern over the medium term. Hence, we remain cautiously
positive on the stock and maintain a price target of | 28 (i.e. 0.4x FY13E
EV/Sales) with a BUY rating.
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