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India Equity Research Reports, IPO and Stock News
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I n c r e a s e d c a p a c i t y d r i v e s t o p l i n e …
SpiceJet’s revenue grew 33.6% YoY to | 945.6 crore during Q1FY12 on
account of an increase in the number of flights (up 40.5% YoY) to cater to
the healthy pax demand. However, the growth remained lower than the
rise in the number of flights due to a drop in yields and load factor due to
the lean season. SpiceJet’s load factor and yield declined by 890 bps and
3.5% YoY, respectively, on account of an increase in capacity although its
market share improved by 80 bps YoY to 14%. Fuel prices during Q1FY12
were 43% higher than same period last year. Fuel cost constituted 53% of
the total costs in Q1FY12 as compared to 36% in Q1FY11 and 42% for the
full year FY11. This, in turn, put a major dent in its operating margin. As a
result, the company posted a net loss of | 72 crore as against net profit of
| 55 crore last year.
ƒ Market share improves, margins decline on higher fuel prices
SpiceJet’s market share for the quarter increased 80 bps mainly due
to a rise in its capacity. As a result, the company has been able to
post revenue growth of over 33% YoY vs. industry growth of 16%
YoY. On the cost front, fuel prices recorded a sharp 43% YoY jump.
This, in turn, put pressure on operating margins as the higher cost
burden was not being fully passed on to consumers during the
quarter due to the competitive environment and lean season impact.
ƒ Load factor declines sequentially due to rise in capacity
During the quarter, there has been increase of over 41% YoY in the
company’s domestic flights on account of addition of eight aircraft.
Due to this sharp increase, the load factor for the quarter declined
by 883 bps YoY and 170 bps QoQ while demand continued to grow
at an average rate of 16% YoY.
V a l u a t i o n s
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. However, the medium term outlook remains cautious for the
sector due to competitive pricing environment, lean season and recent
political controversies related to the promoter group. However, we feel
that most risks have been built in the stock at current levels and the
correction seems overdone. We maintain our BUY rating on the stock
with a price target of | 28 (i.e. 0.4x FY13E EV/sales)
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
I n c r e a s e d c a p a c i t y d r i v e s t o p l i n e …
SpiceJet’s revenue grew 33.6% YoY to | 945.6 crore during Q1FY12 on
account of an increase in the number of flights (up 40.5% YoY) to cater to
the healthy pax demand. However, the growth remained lower than the
rise in the number of flights due to a drop in yields and load factor due to
the lean season. SpiceJet’s load factor and yield declined by 890 bps and
3.5% YoY, respectively, on account of an increase in capacity although its
market share improved by 80 bps YoY to 14%. Fuel prices during Q1FY12
were 43% higher than same period last year. Fuel cost constituted 53% of
the total costs in Q1FY12 as compared to 36% in Q1FY11 and 42% for the
full year FY11. This, in turn, put a major dent in its operating margin. As a
result, the company posted a net loss of | 72 crore as against net profit of
| 55 crore last year.
ƒ Market share improves, margins decline on higher fuel prices
SpiceJet’s market share for the quarter increased 80 bps mainly due
to a rise in its capacity. As a result, the company has been able to
post revenue growth of over 33% YoY vs. industry growth of 16%
YoY. On the cost front, fuel prices recorded a sharp 43% YoY jump.
This, in turn, put pressure on operating margins as the higher cost
burden was not being fully passed on to consumers during the
quarter due to the competitive environment and lean season impact.
ƒ Load factor declines sequentially due to rise in capacity
During the quarter, there has been increase of over 41% YoY in the
company’s domestic flights on account of addition of eight aircraft.
Due to this sharp increase, the load factor for the quarter declined
by 883 bps YoY and 170 bps QoQ while demand continued to grow
at an average rate of 16% YoY.
V a l u a t i o n s
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. However, the medium term outlook remains cautious for the
sector due to competitive pricing environment, lean season and recent
political controversies related to the promoter group. However, we feel
that most risks have been built in the stock at current levels and the
correction seems overdone. We maintain our BUY rating on the stock
with a price target of | 28 (i.e. 0.4x FY13E EV/sales)
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