Q3FY18 result highlights
Key positives: Strong passenger growth and better yields.
Key negatives: Increase in interest costs.
Impact on financials: Upgrade of 3.8%/2.5% in FY18E/FY19E earnings due to better than expected yields. Introduced FY20E earnings.
Valuations & view
Spice Jet continues to reap benefits of its increased non-metro/regional focus by way of strong passenger growth and higher fares/yields. We expect the impact of the recent surge in crude prices to be passed on in tariffs by Q1FY19 given that the demand supply balance remains favourable for the industry. With strong cash generation we expect SpiceJet’s balance sheet to continue to strengthen (we expect net cash position by Mar-19). The stock trades at 7.8x/7.1x FY19E/FY20E EV/EBITDAR and we value SpiceJet at 8.4x FY20E EBITDAR (5% discount to multiple assigned to IndiGo). We maintain Outperformer with a revised price target of Rs181.
Spicejet Ltd is an India-based company engaged in transportation of passengers by air. The Company is engaged in the business of scheduled air transport services. Its geographical segments include India and others. It provides air transport services for the carriage of passengers and cargo. The Company is a low cost carrier (LCC) operating under the brand name of Spice Jet in India. The Company operates a fleet of approximately 40 aircraft, including approximately seven aircraft taken on wet lease across various routes in India and abroad. The Company's spice add-on includes spice cash/spice club, SpiceMax, hot meals, SpiceCash Top-up, priority check-in, Spice talk, track Spicetalk request, bag out first, carry more onboard, fly for sure, Spice lounge, my flexi plan, reliance travel insurance, Spice assurance, Spice flex, friends and family, senior citizen discount, student discount, Indian armed forces personnel and red hot offers.
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