SpiceJet has target of Rs 35: SP Tulsian

SP Tulsian of sptulsian.com told CNBC-TV18, "There have been talks of some foreign airlines coming in and picking up stake in SpiceJet. If we see yesterday's move by the government, it has not raised FDI limit in aviation sector. This is probably because they are taking a cautious stance on the Jet Airways-Etihad deal for which the extension shall be sought by the company to conclude the deal by end of November."

He further added, "I am quite confidence and hopeful that once we have some positive indications coming in on Jet-Etihad in form of clearance going through, then there will be a lot of interest by foreign airlines in this company. If one goes by the status of SpiceJet, it is the third largest airline with market share of 20 percent after Indigo and Jet Airways and it is ahead of Air India which is the PSU company."
"Its debt Rs 1500 crore with market cap of Rs 1500 crore is not very high and gives enterprise value (EV) of Rs 3000 crore, which is almost 16-18 percent of the valuations having given to Jet-Etihad deal," he added.
Tulsian further said, "The financials are very much in place, the promoter stake is also quite respectable. Institutional investment or the stake is not very high about 14-15 percent. So, from all parameters, even if one sees their root operations it has over 50 aircrafts, it covers about 300 flights per day. Its top line has been quite good, close to about Rs 5700 crore for FY13 on which the net loss was just about Rs 190 crore that largely came in from the interest of about Rs 115 crore."
"The cash loss of Rs 120 crore is largely coming in from the interest. If we see any news like one seen in Mangalore Chemicals, the stock moved from Rs 42 to Rs 72 in just a week to 10 days time, I don't think people will have an opportunity to acquire the share once the news flows are out."
He said, "The downside is very limited from current levels and on the upside the trigger is likely to be induction of a foreign airlines or picking up stake in the company. That can make the stock to move to a level of Rs 50 also in next one year. I have set a price target of Rs 35 in next six months." Disclosure: He holds SpiceJet.