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ICICI Securities
SpiceJet (Buy)
CMP: ₹131.6
Target: ₹175
Key takeaways: a) SpiceJet announced the launch of its dedicated air cargo service namely “SpiceXpress” in September 2018. The cargo service operates on both domestic and international routes and is powered by fully integrated transportation network including air cargo, ground transportation and warehousing facilities across the country.
b) SpiceJet has taken three steps to fortify international operations: 1) MoU with Emirates airline to integrate operations through code-share and interline arrangements; 2) appointment of Amadeus as its first global distribution partner; and 3) being a member of International Air Transport Association (IATA), making it the first low-cost carrier in India to join the association.
c) SpiceJet maintains liability of ₹640 crore towards ex-promoter case. The company maintains ₹261 crore as deposit with Delhi High Court with respect to this liability under other non-current assets while the remaining as deposits under lien in other current assets.
We now adopt P/E-based valuation methodology (adjusted EV/EBITDAR earlier) inline with the basic principle of Ind-AS 116. Maintain BUY rating with an unchanged target price of ₹175 based on 10.5x FY21E P/E (7x adjusted EV/EBITDAR earlier). 10.5x multiple is post giving 30 per cent discount to 15x to adjust for no taxes paid by SpiceJet.
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