Company Overview

SpiceJet is a low cost airline founded by MD- Ajay Singh and headquartered in Gurgaon, India
founded in 2005.

Key highlights for the year ending March Key highlights for the quarter ending
2019: March 2019:

• Aircraft fleet size of 100 • Company reported a profit of 22%

• Second largest domestic market share of despite the grounding of Boeing 737
13.7% MAX aircrafts which could have led to
• Industry’s highest domestic load factor of losses
93%. Load factor indicates the capacity • Reported a profit in Q4
utilization of the aircraft.
• Capacity in terms of available seat
kilometer is up by 14%
• Reported net loss of INR 316.1 crore
following a net loss INR 427.5 crore in the
first two quarters
Source: Investor Presentation Q4 2019
 Aviation market
Domestic International
2(a) % Passenger Growth (YoY)
1(a) % Passenger Growth (YoY) 67%
71%

Industry Par
Spicejet Pax 20%
14% 10% 14%
24% 24% 20% 5% 7% 10% Industry Par
19% 19%
13% Spicejet Pax
5% FY16Q4 FY17Q4 FY18Q4 FY19Q4

FY16Q4 FY17Q4 FY18Q4 FY19Q4

1(b) % Domestic market – Quarter Ending 2(b) % Domestic market

9.1%– Quarter Ending
13.7% 8.9%

13.2%
Spicejet Market Share 8.2%
12.8% 8.1% Spicejet Market Share
12.7%

FY16Q4 FY17Q4 FY18Q4 FY19Q4

FY16Q4 FY17Q4 FY18Q4 FY19Q4

Graphs depicting the passenger growth rate and market share of Spicejet in (a) domestic and (b) international markets
Source: Investor Presentation Q4 2019
 Profitability

Net Profit FY 2017-18

8,000.00
• EBITDA increased from 6,234 in 2016-17 to 8370
6,000.00 • EBITDAR increased from 15,840 in 2016-17 to 18,692
• EAT increased from 4307 in 2016-17 to 5667
4,000.00

2,000.00 FY 2018-19
0.00
• EBITDA decreased from 8370 in 2017-18 to 484
-2,000.00 • EBITDAR decreased from 18,739 in 2017-18 to 13,451
• EAT decreased from 5,667 in 2017-18 to (3161)
-4,000.00

-6,000.00
The company reported losses in the first 2 quarters of 2019 due to
-8,000.00 depreciation of rupee and increased fuel prices. It recovered in Q4
despite the grounding of Boeing MAX 737 aircrafts. Overall, the
-10,000.00
company has reported profits since 2015, except in 2019.
-12,000.00
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
Yearly net profit

All figures are in millions (INR)

 Stock analysis
• Closely follows industry leader – Indigo
• Expected market capitalization : Rs 10,500 cr
Number of shares : 60 cr
SpiceJet Target price : Rs 175
(Sarthak Mukherjee, 2019)

• Current Share price : Rs 123.25

• Expected Return of 42%
 KEY FINANCIAL RATIOS OF SPICEJET, INDIGO AND-JET MARCH 2019

FINANCIALS RATIOS SPICEJET INDIGO JET AIRWAY

VALUATION
EV/EBITDA 50.10 43.27 15.61
LIQUIDITY
CR 0.38 2.26 0.50
QR 0.34 2.24 0.46
PROFABILITY
Return on Equity 90.13 2.24 10.59
Return on Assets -6.59 0.62 -6.14
PER SHARE RATIOS
EPS -5.27 4.06 -67.5
 Future plans
• SpiceJet and Emirates have signed a Memorandum of Understanding (MoU) to enter into a
reciprocal codeshare agreement to increase connectivity across America, Europe, Africa
and the Middle East.
• Plans to connect all seven North East states with Guwahati
• Plans to add 35 planes to the fleet and increase total capacity by 80% for FY2020
• Announced 106 new flights connecting cities with Mumbai and Delhi

Source: Investor Presentation Q4 2019

 Sector Analysis – Key
challenges
• Disruption in Jet Airways – Spicejet can capitalise
• Both airlines operate Boeing 737 – Spicejet can amalgamate crew and aircraft
from Jet airways faster
• Allocation of slots from Jet’s portfolio to Spicejet by DGCA including 68 prime
slots in Mumbai
• Grounding of Boeing 737 Max aircraft
• Spicejet had to ground 13 aircraft; utilization of high-value inventory reduced
growth in yields in Q4FY19
• Return to service of 737 Max flights in August (estimated) and increase in
capacity (80% ASK growth guidance) expected to improve profitability
 Sector Analysis – Key
challenges
• Aviation Turbine Fuel prices
• 16.9% decline in ATF prices YoY; crude oil prices steady at $60 – 65/ barrel,
down from $75-85/ barrel in previous quarters
• Rupee steady in 69 – 71 per USD range, down from high of 74.33 in October
2018
• Steady fuel prices & improvement in fleet fuel efficiency with induction of
new 737 Max aircraft – improvement in profitability
 Recommendation &
Rationale
• Recommendation: BUY
• Rationale:
• Financial
• Healthy financial ratios as compared to industry benchmark
• Industry Performance
• Excellent performance on key metrics with industry leading PLF and
Revenue per ASK
• Future Prospects
• Growing fast with guidance of 80% increase in ASK in FY20
• Estimated to potentially increase market share by approximately 5%e