Prabhudas Lilladher's research report on Spice JetThe Indian aviation sector is in a sustained growth phase on the back of multiple levers like increasing load factor, sustained growth in passenger traffic and fall in jet fuel prices. Lower industry fleet size and the continued propensity of Indian travelers to gravitate towards Low Cost Airline Carriers (as against preferring alternative modes or Full Service Carriers) have led to higher Passenger Load Factor (PLF) for the airline companies. Our positive stance on the sector is further reinforced by the sharp fall in crude oil price which leads to not only higher profitability, but eases up the working capital requirement.We initiate coverage on SJ as our top pick in the sector with a ‘BUY’ rating. Our price target for SJ is Rs128 (based upon 12.5x FY17e EPS); at CMP it trades at 8.8x FY17e. At our price target, SJ trades at EV/EBITDAR of 4.5x FY17e.
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