Dec 01, 2016 05:55 PM IST IST | Source: Moneycontrol.com
Buy Spicejet; target of Rs 91: Edelweiss
Edelweiss is bullish on Spicejet has recommended buy rating on the stock with a target price of Rs 91 in its research report dated November 25, 2016.
Edelweis's research report on Spicejet
SpiceJet’s (SJ) INR 589mn profit in Q2FY17 surprised positively as sustained yield pressure in a lean quarter had kept expectations muted. The 3% YoY yield dip was much lower than that reported by peers. Key quarter highlights were: a) dip in non-fuel costs driven partly by increase in average stage length and renegotiation with vendors; and b) fall in aircraft lease rentals on conversion of wet to dry lease and pricing rationalisation. While operating parameters and yield/cost management continue to be healthy, balance sheet remains vulnerable to near-term liability risk arising from the HC order, amidst settlement of past dues. Factoring in a resilient Q2FY17, we retain ‘BUY’ with revised TP of INR 91 (INR 87 earlier).
While operating parameters and yield/cost management continue to be healthy, balance sheet remains vulnerable to near-term liability risk arising from the HC order on warrants issue, amidst settlement of past dues. At CMP, the stock trades at 6.3x FY17E and FY18E EV/EBITDAR, respectively. We value the stock at 7.5x FY18E EV/EBITDAR (assuming dilution from impending warrants issue). We maintain ‘BUY’ with target price of INR 91.
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