Buy SpiceJet; target of Rs 103: HDFC Securities

HDFC Securities' research report on SpiceJet

SpiceJet printed 3QFY19 revenue of Rs 24.9bn (+19.4% YoY/32.2% QoQ). Spicejet’s yield improved to Rs 4.07, +1.8% YoY (Indigo’s at Rs 3.86, +4.5% YoY) while load factors declined 220bps YoY to 91.6%. EBITDAR at Rs 4.6bn was above our estimate of Rs 3.0bn mainly as a result of reversal of expenses of ~Rs 250mn (on account of forex movement) and higher operating income at Rs 1bn. Other operating income was higher on account of a one-time (amount not disclosed) equipment selection incentive. Other income at Rs 440mn helped boost APAT, which slumped 77.1% YoY to Rs 551mn.

Outlook

We retain our BUY stance with a revised TP of Rs 103, based on a EV/EBITDAR target multiple of 8x on a Dec 20E EBITDAR. We will be keenly watching the competitive intensity of the industry and the impact it has on yield and load factors. Our estimates remain highly susceptible to ATF prices and currency movements.