SpiceJet - 4QFY2012 Result Update - Angel Broking

Strong top-line growth, while margin declines: For 4QFY2012, SpiceJet reported strong top-line growth of 46.7% yoy on the back of capacity additions during the year. EBITDAR margin declined by 906bp yoy to negative 2.5% and EBITDA margin declined by 845bp yoy to negative 18%, owing to higher fuel cost during the quarter. The company could not raise its ticket prices as much as fuel cost due to stiff completion from FCC players, who were reducing prices to increase load factors and gain market share. The company registered loss of Rs.249cr in 4QFY2012 compared to loss of Rs.59cr in 4QFY2011.

SpiceJet to turn profitable in FY2013: SpiceJet currently has a fleet of 34 Boeing aircraft and seven Bombardier aircraft. The company will also add three Boeing and four Bombardier aircraft by the end of FY2013. In FY2014, the company will further add five Boeing aircraft and three Bombardiers. By the end of FY2014, the total tally would be 41 Boeings and 15 Bombardiers, as per the current expansion plans. We expect the company's net sales to post a 27.6% CAGR to Rs.6,513cr over FY2012-14. We believe the industry is witnessing a structural change, where airline companies have increased their ticket prices and competition has reduced to a certain extent. Load factors have also been improving for all airlines post Kingfisher's capacity reduction.

We expect SpiceJet to report 80%+ load factor in 1QFY2013 and report profit in the same quarter. With the company's expected fuel import to start from July 2012, we expect its profit margin to further improve from 1QFY2013. We recommend Buy on the stock with a target price of Rs.40.

Source : Equity Bulls

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