SpiceJet share price rallies 3% despite HSBC's 'reduce' call

SpiceJet shares have rallied over 14 percent in the past month.

Shares of low-cost carrier SpiceJet Limited rallied over 3 percent to Rs 64 in early trade on September 5 even as HSBC maintained its reduce call on the counter and assigned a price target of Rs 26, way lower than the current market price Rs 62.

The analysts at HSBC note that the company could use the Rs 23,000 crore from its QIP to fund losses and working capital, given the absence of aircraft. However, there is no visibility on capacity growth and profitability.

With significant debt and just a 3 percent market share, HSBC believes SpiceJet’s valuation is too expensive. The key question remains whether the company can revive its business from such low levels.

The cash-strapped airline has been in the headlines of late. Last week, the aviation watchdog Directorate General of Civil Aviation (DGCA) decided to place crisis-hit airline under enhanced surveillance. DGCA said it conducted a special audit of the airline's engineering facilities on August 7 and 8 and certain deficiencies were found during the audit.

The enhanced surveillance will entail increased spot checks and night surveillance to ensure the safety of the airline's operations.

The company reported a 20 percent decline in its consolidated net profit for the first quarter ending June 2024, at Rs 158 crore, compared to Rs 198 crore in the same period of the previous financial year.

At about 9:20 am, shares of the company were trading at Rs 63, about 1 percent higher from the last close on the NSE. SpiceJet shares have rallied over 14 percent in the past month.