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SpiceJet Ltd
1QFY12: Another loss making
quarter
„Cut PO on higher cost assumptions; Maintain Underperform
We have cut our EBITDAR estimates by 4%/1% for FY12E/13E on account of
higher employee cost and aircraft maintenance cost assumptions. This is largely
due to stronger capacity addition. We also raise our traffic assumptions by 4%-5%
over FY12-13E on account of stronger capacity addition. We marginally tweak our
yield assumption while keeping the load factors unchanged. We cut our PO to
Rs23 (from Rs25) which is based on an unchanged target multiple of 9x FY13E
EV/EBITDAR on our lower EBITDAR estimate.
High fuel cost & lower load factors spoil 1Q results
On account of higher fuel cost and lower utilization, SpiceJet reported net loss of
Rs720mn in Q1FY12 (vs. Rs552mn profit in Q1FY11). Q1FY12 load factor was
down 890bps YoY (-210bps QoQ) on account of strong capacity addition (~37%
YoY ASKMs growth). On account of stronger capacity growth we expect SpiceJet
to show 350bps drop in load factor in FY12E & further 150bps drop in FY13E.
Yields improve…but not enough yet
Yields for the quarter showed a ~7% YoY improvement on account of increase in
fuel surcharges. A large portion of SpiceJet’s traffic growth comes from the price
sensitive non-corporate leisure travelers. This, coupled with aggressive capacity
addition by the LCCs, restricts SpiceJet from significantly improving yields despite
higher costs. We expect 3%-5% yield growth over FY11-13E which is not
expected to enable break-even for SpiceJet.
Industry outlook remains bleak
Outlook for Indian domestic aviation remains weak on account of (a) moderating
traffic growth, (b) stronger capacity growth, (c) restricted yield growth, (d) falling
load factors and (e) high fuel cost.
Price objective basis & risk
SpiceJet Ltd (MDLFF)
Our PO of Rs.23 is based on 9x FY13E EV/EBITDAR, which is in line with the
regional airlines with low EBITDAR margins in the low cycle. Upside risk: sharp
decline in fuel prices and faster-than-expected economic growth. Downside risk:
further increase in fuel prices and increase in competitive intensity.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
SpiceJet Ltd
1QFY12: Another loss making
quarter
„Cut PO on higher cost assumptions; Maintain Underperform
We have cut our EBITDAR estimates by 4%/1% for FY12E/13E on account of
higher employee cost and aircraft maintenance cost assumptions. This is largely
due to stronger capacity addition. We also raise our traffic assumptions by 4%-5%
over FY12-13E on account of stronger capacity addition. We marginally tweak our
yield assumption while keeping the load factors unchanged. We cut our PO to
Rs23 (from Rs25) which is based on an unchanged target multiple of 9x FY13E
EV/EBITDAR on our lower EBITDAR estimate.
High fuel cost & lower load factors spoil 1Q results
On account of higher fuel cost and lower utilization, SpiceJet reported net loss of
Rs720mn in Q1FY12 (vs. Rs552mn profit in Q1FY11). Q1FY12 load factor was
down 890bps YoY (-210bps QoQ) on account of strong capacity addition (~37%
YoY ASKMs growth). On account of stronger capacity growth we expect SpiceJet
to show 350bps drop in load factor in FY12E & further 150bps drop in FY13E.
Yields improve…but not enough yet
Yields for the quarter showed a ~7% YoY improvement on account of increase in
fuel surcharges. A large portion of SpiceJet’s traffic growth comes from the price
sensitive non-corporate leisure travelers. This, coupled with aggressive capacity
addition by the LCCs, restricts SpiceJet from significantly improving yields despite
higher costs. We expect 3%-5% yield growth over FY11-13E which is not
expected to enable break-even for SpiceJet.
Industry outlook remains bleak
Outlook for Indian domestic aviation remains weak on account of (a) moderating
traffic growth, (b) stronger capacity growth, (c) restricted yield growth, (d) falling
load factors and (e) high fuel cost.
Price objective basis & risk
SpiceJet Ltd (MDLFF)
Our PO of Rs.23 is based on 9x FY13E EV/EBITDAR, which is in line with the
regional airlines with low EBITDAR margins in the low cycle. Upside risk: sharp
decline in fuel prices and faster-than-expected economic growth. Downside risk:
further increase in fuel prices and increase in competitive intensity.
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