SpiceJet shares soar 339 per cent in a year, should you invest?

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Updated: November 25, 2015 1:18:51 PM

In the past one year, the share price of Spicejet sky rocketed 339 per cent to Rs 68.85 on November 23.

spicejetIn the past one year, the share price of Spicejet sky rocketed 339 per cent to Rs 68.85 on November 23. (Photo: PTI)

For years the Indian aviation sector experienced turbulent times. The stocks of the aviation companies also went through a rough patch. However, with the sharp drop in Jet Fuel prices, the aviation sector staged a smart recovery in the past one year with shares of SpiceJet soaring over 300 per cent in a year. The scrip hit its new 52-week high of Rs 72.50 on Tuesday.

During November 24, 2010 and November 24, 2014, shares of Jet Airways and SpiceJet slid 71.45 per cent and 81.52 per cent, respectively. The benchmark index BSE Sensex surged 46 per cent during the same period.

In the past one year, the share price of SpiceJet soared 339 per cent to Rs 68.85 on November 23. The scrip was at Rs 15.68 on November 24 last year. Stocks of its competitor Jet Airways climbed 84.6 per cent during the same period. Newly listed Interglobe Aviation which debuted on the bourses on November 10 gained nearly 20 per cent in the past eight trading session.  

Kunj Bansal, executive director and chief investment officer, Centrum Wealth, said, “The biggest boost has come in the form of a steep drop in Jet Fuel or Aviation Turbine Fuel (ATF) prices. Fuel prices have declined by about 40 per cent since the last quarter of 2014. According to industry data, this could bring down the cost for an Indian Carrier to 30-35 per cent from 45 per cent reported last year.”

India has the fastest growing domestic aviation market in the world, ahead of China and the US. According to the International Air Travel Association (IATA), the number of air passengers rose almost 20 per cent in the eight months ended August 31, 2015 compared with the same period a year ago. According to a report commissioned by Vistara Airlines and conducted by the Centre for Asia Pacific Aviation (CAPA), the number of air travellers in the country is slated to rise to 218 million by 2025 from 70 million in 2015. Aviation could contribute 5 per cent to the country’s GDP or $250 billion by 2025.

The SpiceJet makeover earlier this year also came as a breath of fresh air for the industry. Ever since the Kingfisher debacle, D-Street distanced itself from the aviation stocks. SpiceJet was also on way to similar downfall with mounting debt, cancelled flights, unpaid salaries, quarterly losses and no capital infusion. But in Q4FY2015, Ajay Singh, one of the airline’s founder members took over its reins and things started looking up. With recapitalisation, the company settled outstanding dues, renegotiated contracts, optimised aircraft utilisation and revenue maximisation. The stock is up a whopping 281 per cent on a year to date basis.

For the quarter ended September 2015, SpiceJet reported a net profit of Rs 23.77 crore on the back of a steep fall in fuel costs and other expenses. It had a net loss of Rs 310.45 crore in the year-ago period. However, SpiceJet’s total income from operations declined over 28 per cent to Rs 1,040.13 crore in July-September of the current fiscal.

Jet Airways reported net profit of Rs 87.59 crore for the last quarter ended September 30, 2015. The company reported net profit of Rs 69.82 in the same quarter last year.

For the year, ended March 2015, Spice Jet posted net loss of Rs 748.41 crore against net loss of Rs 1003.24 crore last year. In the financial year ended March 2012 and 2013, SpiceJet posted net loss of Rs 605.77 crore and Rs 191.08 crore, respectively. However, in FY 2010-11, it reported net profit of Rs 103.43 crore.

Jet Airways reported a consolidated net loss of Rs 2101.36 crore for the year ended March 2015 against net loss of Rs 4128 crore last year.

For the financial year ended March 2015, InterGlobe Aviation reported net profit of Rs 1,295.58, up 173 per cent, against Rs 474.44 crore in the previous financial year. The company registered net profit of Rs 987.3 crore in the financial year ended March 2013.

SpiceJet is reportedly planning to buy at least 150 new planes. The company is in talks with aircraft manufacturers to place orders for 100 narrow-bodied aircraft (Boeing 737 MAX or Airbus 320 Neo) and 50 turboprop aircraft. The company is buying large aircraft for metros and larger towns, while small aircraft for smaller regional towns. Currently, the company operates a fleet of 25 Boeing, two Airbus (on wet lease) and 14 Bombardier aircraft.

As part of its expansion plan, the low cost airline in November has launched direct flight service to Dubai from Amritsar.

In terms of On-Time Performance (OTP), SpiceJet remained on the second spot (86.9 per cent) after IndiGo (89.6 per cent) in October. The OTP numbers have been computed on the basis of four metro airports – Bengaluru, Delhi, Hyderabad and Mumbai, according to agencies.

For investors, Bansal of Centrum said, “Indian airlines seem to be in a sweet spot currently. With fuel prices at an all-time low, the government pushing for over 50 per cent FDI in domestic carriers, air traffic showing strong growth and a number of fresh issuances in the aviation sector, domestic carriers look well placed in the short term.”

“One should book profit in a phased manner as SpiceJet shares have overstretched valuations,” said G Chokkalingam, founder and managing director of Equinomics Research & Advisory .

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