SNAPSHOT

BSE CODE: 500285
INDUSTRY: AVIATION
CMP: 78.15
52 WEEK HIGH/LOW: 97.45/54.45
MARKET CAP: 3010 Crore
FACE VALUE: 10
BOOK VALUE: -2.08
PE: 15.70
EPS: 4.98

Overview :

SpiceJet is India’s most efficiently run low-cost carrier. It is pioneer in domestic Low budget air carrier with 130 flights to 20 destinations on daily basis. Beside All 4 metros, It Covers some major cities like Ahmadabad, Pune, Jaipur, Goa, Kochi, Varanasi, Jammu, Srinagar, Guwahati, Coimbatore, Hyderabad, Vizag & bagdogra (nearest airport of Darjeeling). Currently, It has market share around 15%. As Spicejet has completed 5 years of operation Since Inception, Hence now it can start its international flights. Few Months back in June, SunTv founder Kalanithi maran acquired 37.7% Stake in SpiceJet by open offer around 950 Crore which will take place in next few months.

Investment Thesis

1) Competitor

There is not much listed player in Aviation Space. Jet Airways, SpiceJet and KingFisher are 3 important players that are listed. 4th probably be GoAir airlines as news buzzing for its listing by Mr. Wadia owner of Bombay Dyeing. So, today if someone wants to invest in Aviation space then SpiceJet is probably best Option. KFA is highly leveraged and will take atleast 2 times to raise fund to run and expand KingFisher. JetAirways as largest private player also has some debt issue but strong, stable and highly likely that it will perform better in years to come. Hence, Choice comes between Jet Airways and Spice Jet in Aviation Stocks and SpiceJet has little advantage over JetAirways.

2) Debt Issue

All Companies facing debt issue in this sector. The Sector is facing under a huge debt pressure of more than 55,000 crore. Maximum by Kingfisher and minimum by SpiceJet in Listed Arena. After Entry of Mr. Maran, SpiceJet debt level has reduced to almost negligible.

3) Profitable Margin

Spicejet poised to do better compare with its peers due to Strong profitability growth due to low leverage and high loading factors. Its Most efficiently run (LCC) low cost carrier in the country. In India, The aircraft of Spicejet utilization is amongst the highest. In Last quarter, Company has performed better than industry expectation and highly likely that company might post profit in coming results.

4) Expansion

After Jet Airways starting international operations. SpiceJet also started its international services in October connecting Kathmandu to New Delhi and Chennai to Colombo. This acted as positive trigger. To make International Journey Successful, Company has ordered 30 Boeing 737 aircrafts pegged at approx 12,000 Crore to take its fleet size to 75 planes by 2018. Deliveries for these Boeing will begin from 2014 and will continue till 2018

5) Promoters

Management is re-rated by entry of Media stalwart Kalanithi Maran. Many people consider Maran entry as good due to politically well-connected. I don’t agree, Success of SunTV clearly shows much more than that. After acquiring close to 38% stake, Mr. Maran will help the company to focus on Growth and expansion and create niche in the space. Most stable promoters & shareholding pattern among listed aviation stocks.

CONCERN:

1) Across the world, the fuel cost consists of almost 40% of the total expenses and any rise in Fuel prices can affect the company profit margin. Example, Crude Oil went 15% Up & Stock price is 15% down. Currently, Crude Oil is Above 90 $ / barrel and stock price is moving downward

2) Any New Government Policy related with New Tax, Domestic Space in Aviation, Increase in Surcharges, etc. can affect company performance.

CONCLUSION: Aviation Industry is growing by 18% YoY Basis and At the CMP of 78; the stock is trading little above 20x its FY11EEV/EBITDA, with all fundamental analysis SpiceJet is best bet in Aviation Sector. This is the stock which has power to give 30% return and even 300% also in next 3-5 years. If you are adventurous by nature and want to fly high, then this stock can give enormous return and add more spice to your portfolio. If you are safe investors with less risk-appetite and get nervous by 20%-40% downside move in your scrip, then this is not suitable for you.

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Disclaimer : This document is provided for assistance only and nothing should be construed as investment advice and nothing in this document is solicitation to buy or sell the securities of companies referred to in this document. This is Stock Idea based on fundamental Analysis not Multibagger Stocks recommended to Multibagger Plus Subscribers of Equityahead.net.

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