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Last Updated : Sep 08, 2016 04:23 PM IST | Source: Moneycontrol.com

SpiceJet may lose steam post 14% jump, CLSA tells you why

The brokerage house says that SpiceJet‘s best is behind us with Q1FY17 and expects scale of capacity addition in the industry as well as by SpiceJet not only to dampen yields but also lower SpiceJet‘s utilisation levels that have been at unsustainably high levels. Moreover, fuel savings will also start to evaporate, it adds.

 
 
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Investors may be soon losing appetite for SpiceJet after it rose around 24 percent  (intraday) and 14 percent in two days on better-than-expected June quarter. CLSA says that despite good Q1, SpiceJet’s margins were far lower than competitor IndiGo's. It advises investors to sell the stock stating that SpiceJet’s Q1FY17 performance wasn’t a surprise, especially given a particularly weak base in 1Q16 when its pricing plummeted from massive cancellations and poor service reliability. It has set a target of Rs 35 per share.


Shares of SpiceJet rose 7 percent intraday on Thursday.


The brokerage house says that SpiceJet’s best is behind us with Q1FY17 and expects scale of capacity addition in the industry as well as by SpiceJet not only to dampen yields but also lower SpiceJet’s utilisation levels that have been at unsustainably high levels. Moreover, fuel savings will also start to evaporate, it adds.

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The Ajay Singh-led aviation company's Q1 net profit surged by a whopping 104 percent to Rs 149 crore from Rs 73 crore in corresponding quarter last fiscal. Its total income also grew 36.7 percent to Rs 1521.5 crore against Rs 1113 crore in year-ago period. Its Q1 passenger load factor was at an impressive 92.5 percent.


“The key to annual boost in 1QFY17 was a particularly low base in Q1FY16. Given drastic cuts to capacity that SpiceJet was doing then and the dent to its brand, SpiceJet’s Q1FY16 yields plummeted. Average fares for SpiceJet in Q1FY16 were down 20 percent on an annual basis and were 10 percent lower than competitor IndiGo’s,” it says in a note.

At 11:46 hrs SpiceJet was quoting at Rs 65.75, up Rs 0.45, or 0.69 percent on the BSE.

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First Published on Sep 8, 2016 12:53 pm
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