Will investors turn to PVR, Inox, SpiceJet, IndiGo after COVID-19 vaccine launches?

Multiplex and aviation are the two sectors that suffered the most due to the COVID-19 pandemic. The outbreak of pandemic forced governments to impose lockdowns and ban on travels which hit these two sectors very badly.

Both the sectors were hit hard by the pandemic and they have still not recovered to much extent. Moreover, there is still a looming risk that the spiking coronavirus cases and inconsistent travel restrictions in various regions might keep the international air traffic low.

As the vaccine for COVID is now ready and inoculation exercise is expected to begin in the coming weeks, will the fate of these two sectors change?

Brokerage firm ICICI Securities is of the view that the launch of vaccines can lead to faster recovery of air travel, which stagnated at about 2,30,000 level during December 2020.

As per the brokerage firm, the weekly average daily fliers came in at 233 in the week ended January 2 against 235 in the week ended December 26.

For the week ended January 2, an average number of departures per day grew marginally to 2,147 compared to 2,130 in the week ended December 26. The number of fliers per departure also dipped marginally to 108 in the week ended January 2 against 110 in the week ended December 26.

Likhita Chepa, Senior Research Analyst at CapitalVia Global Research is of the view that the domestic air traffic has gained in recent times and is expected to improve further after the launch of the vaccine.

"With the resumption of demand, the aviation sector is expected to recover gradually in the first half of 2021. However, this sector is expected to consolidate this year due to multiple factors like imposed fare bands until late February 2021, a new and more infectious coronavirus strain and slower revival of overseas travel," Chepa said.

As far as the multiplex industry is concerned, Chepa pointed out that we are witnessing a gradual resumption of operations in the industry.

"It is clearly indicative that things are going to take time to return to normalcy. Near-term headwinds are expected to prevail if occupancy remains muted despite the resumption of operations. But looking at the valuations, this space creates an opportunity for long-term investors to lay their bets," Chepa said.

Chepa suggests to 'hold' PVR for medium to long-term while he has a 'buy' call on Inox.

"PVR is one of the major players in the multiplex industry. The company is also planning to raise capital in the near term which would provide a buffer in difficult times. It had liquidity of Rs 550 crore as of the end of October 2020. It seems to be adequately funded to sustain operations. Therefore, we recommend holding it for medium to long term," Chepa said.

"Inox is expected to post better numbers in the upcoming quarter. With expectations over the stimulus package ahead, the multiplex sector is expected to grab investments. Therefore, one can consider buying this stock with a long-term perspective as it holds strong fundamentals," he said.

Among the aviation players, Chepa has a 'buy' on IndiGo and advises to book profit on SpiceJet.

"A positive trend has been witnessed post resumption of operations post lockdown. There is a steady rise in PLF, unit revenue and future bookings on the back of increasing customer confidence in air travel. IndiGo’s balance sheet remains strong which makes it a prospective buy for the long-term," Chepa said.

"SpiceJet has witnessed a considerable rally in recent times on the back of positive development on the vaccine front and easing restrictions on capacity. We would recommend waiting for significant correction before accumulating further. Existing investors can consider booking profits at the current levels," he said.

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