SpiceJet Q2 preview: Analysts estimate 8x EBITDAR growth, loss to narrow

Budget carrier SpiceJet was trading flat ahead of its September quarter results (Q2FY20), slated to be announced later today. 
 

At 9:48 AM, the stock was trading 0.22 per cent lower at Rs 114.8 per share, as against an unchanged S&P BSE Sensex. Thus far in 2019, the low-cost carrier (LCC) has outperformed the benchmark index. The counter has surged 29 per cent YTD, relative to a 12 per cent gain in the S&P BSE Sensex. 

The LCC, in the previous quarter of the current fiscal (Q1FY20), reported a standalone profit of Rs 261.7 crore, while the operating revenue was Rs 3,002.1 crore. Further, the EBITDA was Rs 620.8 crore. On a consolidated basis, the net profit stood at Rs 262.89 crore.
 

Here’s what leading brokerages expect from the results:
 

Edelweiss Securities
 

The brokerage sees loss of Rs 322.4 crore in the recently concluded quarter due to seasonal weakness. The airline had reported a loss of Rs 389.4 crore in Q2FY19.


 

“We expect SpiceJet to report losses in Q2FY20 due to seasonal weakness, albeit lower YoY. Additionally, we expect the airline to continue to clock robust revenue passenger kilometers (RPKM) growth (up 46 per cent YoY) versus mid-single-digit industry growth, coupled with 3-5 per cent YoY rise in yields, despite seasonal weakness,” analysts at Edelweiss wrote in their results preview note.

The brokerage pegs the EBITDAR growth at 8x at Rs 247.5 crore, due to decline in crude oil prices. It, however, cautions that the EBITDAR growth could be off-set by hike in lease rates and forex losses (depreciating rupee) due to translation of lease liabilities. The EBITDAR was Rs (-) 43.8 crore in Q2FY19.

“Although industry growth has slowed down considerably to nearly 5 per cent, the airline continues to capitalise on the vacuum left by Jet Airways’ shutdown. It has, in fact, grown at 9x industry, accounting for bulk of the slots vacated by Jet. Consequently, top-line growth remains robust at 51 per cent at SpiceJet aided by yield expansion,” it said. 

They expect a sequential decline of 89.1 per cent, and 3.8 per cent YoY, in passenger load factor (PLF) for the quarter under review, and would eye the management’s commentary on resumption of 737 Max deliveries

The brokerage has a ‘buy’ rating on the counter, with a target price of Rs 173 apiece.

Prabhudas Lilladher

Analysts at PL, too, expect India’s second largest airline to report losses in the recently concluded quarter, but expects a rise in sales revenue on the back of increased capacity expansion and higher load factor. 

“Although domestic passenger traffic grew by ~2 per cent over April-August, we expect SpiceJet to report 50 per cent YoY growth in sales on the back of 28 per cent/45 per cent increase in 2Q capacity and higher load factors,” they wrote in their results preview note.

The brokerage pegs the sales revenue at Rs 2,817 crore, up 50.3 per cent from Rs 1,874.8 crore logged in Q2FY19. This would, however, translate to a 6.2 sequential decline. Besides, the EBITDAR is estimated at Rs 329.1 crore, with a margin of 11.7 per cent.

“SpiceJet inducted ~5 aircrafts taking its fleet count to 111 aircrafts. We expect the airline to report revenue growth of 50 per cent YoY aided by 3 per cent increase in yields and high load factors (91 per cent). However, it continues to be impacted by the continued grounding of Boeing 737 Max,” the brokerage said.

All Boeing Max aircraft have been grounded worldwide since mid-March of this year, following two fatal crashes that killed over 300 people. As per reports, Boeing expects the B737 Max to receive US Federal Aviation Administration’s (FAA) approval by the end of this year towards its certification of the plane’s flight control software Further, they expect the aircraft to be back in use by January, 2020.

Prabhudas Lilladher has a ‘buy’ rating on the stock, with a target price of Rs 198.