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SpiceJet (SJET)
Others
In-line results. Spicejet 2QFY12 results were in line with our expectations on the
operating profits front. Sales were lower than estimated due to negative surprise on PLF
(67% versus estimate of 71%). Also, yields (average fare) declined by 10% qoq (from
Rs3,663 to Rs3,316 in 2QFY12). We see signs of competitive intensity reducing going
forward (Kingfisher flight cancellations –case in point). Also, profitability would be
much better in 3QFY12E. We have reduced our estimate for FY2012E. BUY with a TP of
Rs50 (8XFY2013E EBITDAR).
In-line results
Spicejet reported 2QFY12 sales at Rs7.7 bn (+22% yoy; -19% qoq) versus our estimates at Rs8.3
bn on account of lower-than-estimated PLF (67% versus estimate at 71%). Loss at EBITDA level
and PAT at Rs2.3 bn and Rs2.4 bn, respectively, was in line with our estimates. Average passenger
fare declined by ~10% qoq to Rs3,317 from Rs3,663 in 1QFY12.
Net debt has increased on account of fleet additions
Net debt of the airline has increased from a net cash position (Rs1 bn) as of March 2011 to a net
debt of Rs4.7 bn as of September 2011 on account of fleet additions of Q-400 aircraft. Also, the
company would have had to fund cash (operational) losses of Rs3.7 bn in the last three quarters
without including any incremental cash outflow on account of working capital.
Second largest player (Kingfisher) is unable to sustain operations – positive for incumbents
According to various new reports, Kingfisher has reduced its scale of operations by anywhere
between 36% and 50% going by the daily flights being operated by the company. Just for a
perspective, these cancellations are happening in the strongest quarter of the year when the cash
flows and profitability of the airlines are at their peaks. Hence, sustaining operations in the coming
quarters would be even more difficult for the airline. Kingfisher has 20% share of the domestic
market. The current scenario augurs well for airlines (which can sustain operations) as going by the
prevailing scenario it looks like the competitive intensity would reduce meaningfully.
3QFY12E promises to be much better
As per our index of average one-week forward fares, yields are up 18% qoq in 3QFY12 (QTD). In
our view, as we approach end of 3QFY12E, yields should be up 10-12% qoq. Combined with a
higher PLF (could improve by 10% qoq in 3QFY12E), 3QFY12E promises to be a much better
quarter. The company might be able to achieve break-even levels or a small profit at PBT level.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
SpiceJet (SJET)
Others
In-line results. Spicejet 2QFY12 results were in line with our expectations on the
operating profits front. Sales were lower than estimated due to negative surprise on PLF
(67% versus estimate of 71%). Also, yields (average fare) declined by 10% qoq (from
Rs3,663 to Rs3,316 in 2QFY12). We see signs of competitive intensity reducing going
forward (Kingfisher flight cancellations –case in point). Also, profitability would be
much better in 3QFY12E. We have reduced our estimate for FY2012E. BUY with a TP of
Rs50 (8XFY2013E EBITDAR).
In-line results
Spicejet reported 2QFY12 sales at Rs7.7 bn (+22% yoy; -19% qoq) versus our estimates at Rs8.3
bn on account of lower-than-estimated PLF (67% versus estimate at 71%). Loss at EBITDA level
and PAT at Rs2.3 bn and Rs2.4 bn, respectively, was in line with our estimates. Average passenger
fare declined by ~10% qoq to Rs3,317 from Rs3,663 in 1QFY12.
Net debt has increased on account of fleet additions
Net debt of the airline has increased from a net cash position (Rs1 bn) as of March 2011 to a net
debt of Rs4.7 bn as of September 2011 on account of fleet additions of Q-400 aircraft. Also, the
company would have had to fund cash (operational) losses of Rs3.7 bn in the last three quarters
without including any incremental cash outflow on account of working capital.
Second largest player (Kingfisher) is unable to sustain operations – positive for incumbents
According to various new reports, Kingfisher has reduced its scale of operations by anywhere
between 36% and 50% going by the daily flights being operated by the company. Just for a
perspective, these cancellations are happening in the strongest quarter of the year when the cash
flows and profitability of the airlines are at their peaks. Hence, sustaining operations in the coming
quarters would be even more difficult for the airline. Kingfisher has 20% share of the domestic
market. The current scenario augurs well for airlines (which can sustain operations) as going by the
prevailing scenario it looks like the competitive intensity would reduce meaningfully.
3QFY12E promises to be much better
As per our index of average one-week forward fares, yields are up 18% qoq in 3QFY12 (QTD). In
our view, as we approach end of 3QFY12E, yields should be up 10-12% qoq. Combined with a
higher PLF (could improve by 10% qoq in 3QFY12E), 3QFY12E promises to be a much better
quarter. The company might be able to achieve break-even levels or a small profit at PBT level.
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