SpiceJet hits 17-month low; stock down 31% in one month

A domestic SpiceJet aircraft is seen off the runway after it skidded off into the unpaved surface during heavy rains in Mumbai.
Shares of SpiceJet continued to remain under pressure, hitting a 17-month low of Rs 76, down 4% on the BSE in an otherwise firm market.

The stock of the budget carrier was trading at its lowest level since March 9, 2017. It has fallen 31% in past one month, as compared to 4% rise in the S&P BSE Sensex.

Thus far in the current calendar year, the share price of SpiceJet tanked 48% from Rs 146 levels, against 13% rise in the benchmark index. The stock hit an all-time high of Rs 156 on December 20, 2017 in intra-day trade.

SpiceJet had posted a net loss of Rs 381 million in June quarter (Q1FY19), on higher fuel cost, weak rupee and a one-time provisioning of Rs 634 million. The net income from operations grew 18.5% at Rs 21,997 million for the reported quarter as against Rs 18,561 million in the same quarter last year.

“Sharp uptick in ATF prices (accounted for 40% of revenue in past) and INR depreciation (the bulk of the cost is USD denominated) will impact profitability given high price sensitivity of the Indian consumer leaving limited ability to pass on costs. Existing airports at Indian metros like Mumbai, Chennai, and Kolkata running at peak capacity could prove to be bottlenecks for growth,” analysts at Edelweiss Securities said in result update.

“We estimate robust volume CAGR of 16% over FY17-20 driving 21% EPS CAGR over the period. While rising oil price is a concern, yield increase (FY19E: up 3%) and ramp up of 15% fuel-efficient Max moderate the impact,” it added.

“SpiceJet has gone slow on capacity addition in the recent past (not added any capacity in Q1 unlike its LCC peers) – growth has tapered below industry growth, resulting in a slight drop in market share,” analysts at SBICAP Securities said.

The company, though, now has a strong pipeline to induct 15 aircraft till Dec’18 (includes 11 737MAX and 4 Bombardier Q400s) ahead of the busy/peak season (Oct-Dec) in the domestic market. On the base of the current fleet size of 58 aircraft, this is expected to rebound volume growth to 20% in H2FY19, the brokerage firm said in quarterly update.

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