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Elara Capital
SpiceJet (Buy)
CMP: ₹118.95
Target: ₹203
SpiceJet reported Q4FY18 PAT at ₹46.2 crore (11 per cent y-o-y; Elara estimate: ₹72.3 crore), driven by strong passenger growth (up 20 per cent y-o-y) and yield or RASK (revenue per seat km) growth (up 8 per cent y-o-y). Strong yield growth has offset the impact of 13 per cent unit fuel cost increase. PAT is lower than our estimates due to higher-than-expected non-fuel CASK at ₹2.39 (Elara: ₹2.35). SpiceJet’s RASK was in-line with our estimates of ₹3.93.
SpiceJet witnessed strong passenger volume growth of 20 per cent y-o-y, in-line with industry growth. Aggressive price war in industry due to seasonally lean demand quarter has not impacted SpiceJet’s ability to pass on higher crude price impact due to its exposure in less competition routes.
Valuation: We maintain Buy with a target price of ₹203. We value SpiceJet at ₹203, ascribing 8.0x FY20 EV/EBITDAR multiple. SpiceJet is our top pick in aviation space, based on our bullish stance on regional market growth, where SpiceJet has highest capacity. The airliner would start receiving Boeing737-8Max and regional Bombardier planes from Q3FY19.
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