Comments
Equity99
SpiceJet (Buy)
Target: ₹105
CMP: ₹71.50
The company posted a stellar performance in Q2-2021, which is traditionally a weak quarter for airlines. The company cut down on the net losses from ₹461.21 crore in Q2-2020 to ₹105.60 crore in Q2-2021. Passenger fares increased by 16 per cent y-o-y to ₹4,561 while the costs per available seat kilometer (ASKM) rose at a lower rate y-o-y. SpiceJet worked with only 29 per cent of its usual capacity it runs with in the quarter.
The performance was also augmented by the fact that the freight and logistics segment revenue has grown 5x y-o-y in Q2-2020 to ₹226.98 crore (21 per cent of revenue in Q2-2021 vs. 1.2 per cent in Q2-2020) while posting a positive segment PBT margin of 9.2 per cent in Q2-2021 compared to negative PBT margin of 63.5 per cent in Q2-2020.
The company has seen huge decline in operating costs across line items including in case of fuel costs, airport maintenance costs and employee expenses. We believe the company’s Q2-2021 performance in terms of improved losses, costs curtailment measures, lower oil prices, and the company’s focus on cargo segment should help it have a 1 per cent CAGR growth in EBITDA over FY2021-FY2025. However, it may continue to have negative net-worth over the forecast period, unless it can further augment its cost structure or experience increased passenger fares, consistently.
Comments
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.