SpiceJet emerged from despair of insolvency and staged a turnaround in the calendar year 2015. As a result, the share price of the airline major soared over 250 per cent in the past one year to Rs 65.25 on June 22.
According to ICICI Securities, SpiceJet is like a phoenix, the company has not only capitalised on benign crude prices, but its earnings profile too has improved on asset utilisation, cost rationalisation and innovative pricing to register consecutive quarterly profits since Q4FY15 along with significant improvement in on time performance.
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SpiceJet reported 224.99 per cent rise in net profit figures for the quarter ended March 31, 2016. Net profit of the company jumped to Rs 73.19 crore in Jan-March 2016 period from Rs 22.52 crore in the corresponding quarter a year ago. For the financial year ended March 31, 2016, SpiceJet reported net profit profit of Rs 407.20 crore against net loss of Rs 687.05 crore in FY 15 and Rs 1,003.24 crore in FY14.
As on June 22, shares of SpiceJet were trading at trailing-twelve months price-to-earnings ratio of 11.39 times against industry P/E of 13.42 times, indicating undervaluation of stocks. SpiceJet shares are among the top picks of a brokerage house Prabhudas Lilladher.
The airline of Wednesday rolled out a new scheme offering base costs as low as Rs 444 on some destinations on its domestic network with a select booking period and limited number of seats.
Of late, in a significant reform measure aimed at bolstering the country’s high growth potential civil aviation sector, the government has allowed foreign entities, except overseas carriers, to own up to 100 per cent stake in local airlines.
Relaxed FDI norms will ensure increased competition in the “huge” domestic aviation sector but foreign airlines will never be allowed to fully own a domestic carrier, a top government official said on June 21.
On the new civil aviation policy, Edelweiss Securities in a research report said, “The new aviation policy reflects a more liberal regime and a pro-growth approach that seeks to create a level-playing field and promote regional connectivity. The regional connectivity scheme augers well for players like SpiceJet, though dilution of the 5/20 rule will undoubtedly heighten competitive intensity in the international market over medium to long term for the incumbents.” The brokerage house is bullish on SpiceJet with target price of Rs 71.
Promoters holds 60.32 per cent stake in SpiceJet. Spicejet chairman Ajay Singh told ET Now that they have no plans to sell stake in SpiceJet as of now and hike in FDI is an enabling provision.
JM Financial in a research report said, “SpiceJet remains the preferred pick given the compelling turnaround story.”
Chandan Taparia, analyst, Anand Rathi Financial Services said, “Overall, we are bullish on SpiceJet shares. However, we can see some correction in the next few days. SpiceJet shares can give nearly 25 per cent return and can touch Rs 80 in the next 3 months.”
On Thursday, shares of SpiceJet closed 2.30 per cent down at Rs 63.75.
(With agency inputs)
