4QFY2010 Result Update I Aviation June 3, 2010 SpiceJet Performance Highlights For 4QFY2010, SpiceJet s Top-line grew 34.3% yoy but fell 12.8% qoq to Rs560cr, slightly lower than our estimate of Rs590cr. The company reported Net Profit of Rs27.5cr in 4QFY2010 v/s a Loss of Rs7.8cr in 4QFY2009, which was lower than our estimates largely because of lower Revenues generated and higher advertisement costs during the quarter. We believe that the company is well placed to benefit from the growing passenger traffic demand and is well equipped to service this growing demand with an estimated increase in capacity by four aircraft during FY2011E. We recommend an Accumulate on the stock. Quarterly performance below expectations: SpiceJet s Top-line increased 34.3% yoy and decreased 12.8% qoq to Rs560cr in 4QFY2010 slightly lower than our estimate of Rs590cr, primarily due to the lower-than-expected departures, which resulted in reduction in available seat kilometer (ASKM) qoq by 6.9% to 2,134mn in 4QFY2010. During the quarter, EBITDAR grew 21.1% yoy to Rs106cr primarily because of revival in passenger demand, which led to higher revenues and also due to lower fuel cost. EBITDAR Margin fell 46.8% qoq mainly on the back of higher fuel cost, which accounted for 17% of Net Sales and Other Expenditure (advertisement costs), which accounted for 7% of Net Sales v/s 32% and 4% in 3QFY2010, respectively. The company reported Net Profit of Rs27.5cr in 4QFY2010 v/s a Loss of Rs7.8cr in 3QFY2009, which was lower than our estimate, as the fourth quarter of a fiscal usually witnesses modest decline in passenger traffic for any airline in India. Outlook and Valuation: We believe that the company is well placed to benefit from the revival in the economy, which has led to increase in passenger traffic demand, and this growth is expected to remain robust over FY2010-12E. Moreover, the company expects to add another four aircraft during the current fiscal in turn further bolstering revenues during the year. With peers Kingfisher and Jet Airways unable to register Profit during 4QFY2010 are unlikely to expand capacity during FY2011-12E in turn further improving SpiceJet s market share. At the CMP of Rs59, the stock is trading at 11.5x FY2011E and 8.1x FY2012E Earnings. We recommend an Accumulate on the stock, with a revised Target Price of Rs65 (Rs84), valuing the stock at 9x FY2012E Earnings of Rs7.2, translating into an upside of 10% from current levels. ACCUMULATE CMP Rs59 Target Price Rs65 Investment Period 12 months Stock Info Sector Aviation Market Cap 1,413 Beta 1.3 52 WK High / Low 65/16 Avg. Daily Volume 3780930 Face Value (Rs) 10 BSE Sensex 17,022 Nifty 5,111 Reuters Code SPJT.BO Bloomberg Code SJET@IN Shareholding Pattern (%) Promoters 12.9 MF/Banks/Indian FIs 45.1 FII/NRIs/OCBs 15.7 Indian Public 26.3 Abs. (%) 3m 1yr 3yr Sensex 0.1 14.5 16.8 SpiceJet (5.7) 122.5 0.7 Key Financials Y/E March FY2009 FY2010 FY2011E FY2012E Net Sales 1,689 2,181 2,718 3,287 % chg 30.5 29.1 24.6 20.9 Net Profit (353) 61 206 293 % chg 164.1-234.9 42.5 FDEPS (Rs) (14.6) 1.5 5.1 7.2 EBITDA Margin (%) (24.8) 1.2 7.1 8.5 P/E (x) - 23.1 11.5 8.1 RoE (%) - - - 50.0 RoCE (%) - 24.5 68.6 46.4 P/BV (x) (3.3) (4.2) 5.4 3.2 EV/Sales (x) 0.9 0.6 0.7 0.5 EV/EBITDA (x) (3.8) 53.8 9.6 5.4 Source: Company, Angel Research Sharan Lillaney Tel: 022 4040 3800 Ext: 338 E-mail: sharanb.lillaney@angeltrade.com Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539 1
Exhibit 1: 4QFY2010 Performance Y/E March 4QFY10 4QFY09 % chg FY10 FY09 % chg Net Sales 559.6 416.7 34.3 2,181.1 1,689.4 29.1 Total Expenditure 548.9 431.3 27.3 2,154.4 2,108.6 2.2 Operating Profit 10.7 (14.5) (173.8) 26.7 (419.2) (106.4) OPM (%) 1.9 (3.5) - 1.2 (24.8) - Interest 1.4 (1.7) (184.6) 6.4 16.0 (60.3) Depreciation 1.9 1.5 23.1 7.6 7.3 5.4 Non Operating Income 28.0 19.0 47.1 61.0 124.1 (50.8) Non recurring items (1.6) (11.7) (86.4) (6.1) (30.9) (80.2) Profit Before tax 33.8 (7.1) (575.5) 67.5 (349.2) (119.3) Tax 6.4 0.7 791.6 6.1 3.3 83.3 Reported Profit After Tax 27.5 (7.8) (450.8) 61.4 (352.6) (117.4) PAT (%) 4.9 (1.9) - 2.8 (20.9) - Adjusted Profit After Tax 27.5 (7.8) (450.8) 61.4 (352.6) (117.4) Adj. PAT (%) 4.9 (1.9) - 2.8 (20.9) - Adj. FDEPS 0.7 (0.3) (309.0) 1.5 (14.6) (110.4) Outlook and Valuation We believe that the company is well placed to benefit from the revival in the economy, which has led to an increase in passenger traffic demand and this growth is expected to remain robust over FY2010E-12E. For April 2010, SpiceJet reported load factor of 81% and we expect the company to end 1QFY2011E with similar load factor. Exhibit 2: Peer Comparison 4QFY2010 JetAirways (Consol) Kingfisher SpiceJet JetAirways (Consol) FY2010 Kingfisher SpiceJet Net Sales 2,778 1,352 560 11,876 5,068 2,181 EBITDAR 635 167 106 2,221 194 416 Margin(%) 22.9 12.3 18.9 18.7 3.8 19.1 Net Profit 59 (420) 27 (420) (1,647) 61 Margin(%) 2.1 (31.1) 4.9 (3.5) (32.5) 2.8 Source: Company, Angel Broking SpiceJet s peers such as Kingfisher and Jet Airways, continue to be in Losses (reported Rs1,647cr and Rs420cr Losses for FY2010, respectively), while Air India is also expected to report around Rs5,400cr Loss for FY2010. Hence, these players are unlikely to expand capacity during FY2010E-12E, which would further improve market share for SpiceJet. In case of SpiceJet, it was the only listed airline that was profitable for FY2010. The company is also well equipped to meet the increasing demand in passenger traffic as it has plans to expand its fleet size by eight aircrafts by FY2012E (four each in FY2011E and FY2012E). The company expects to add an aircraft by mid-june 2010. Moreover, owing to the increasing demand in passenger traffic and few capacity additions expected during FY2011E, we expect the ticket prices to increase by 10-15%, which would in turn boost Revenue and Profitability for SpiceJet. June 3, 2010 2
At the CMP of Rs59, the stock is trading at 11.5x FY2011E and 8.1x FY2012E Earnings. We recommend an Accumulate on the stock, with a revised Target Price of Rs65 (Rs84), valuing the stock at 9x FY2012E Earnings of Rs7.2, translating into an upside of 10% from current levels. Key risks to our call: 1) Growth in passenger traffic demand to remain muted, 2) Fails to expand fleet size as planned, 3) Higher than expected ATF prices. June 3, 2010 3
Profit & Loss Statement Y/E March FY2007 FY2008 FY2009 FY2010 FY2011E FY2012E Net Sales 749 1,295 1,689 2,181 2,718 3,287 Other operating income Total operating income 749 1,295 1,689 2,181 2,718 3,287 % chg 140.5 72.8 30.5 29.1 24.6 20.9 Total Expenditure 920 1,547 2,109 2,155 2,527 3,007 Fuel & Oil 399 703 945 814 1,013 1,225 Other Mfg costs 187.1 345.2 476.4 511.8 584.9 675.2 Personnel 97.2 143.2 155.1 181.7 211.2 255.4 Other 88.8 103.4 173.0 257.3 276.6 317.8 EBITDA (170.3) (252.0) (419.2) 26.2 191.6 280.5 % chg 226.8 47.9 66.3 (106.2) 632.5 46.4 (% of Net Sales) (22.7) (19.5) (24.8) 1.2 7.0 8.5 Depreciation& Amortisation 5.847 7.817 7.254 7.661 8.446 8.869 EBIT (176.2) (259.8) (426.4) 18.5 183.2 271.7 % chg 192.3 47.5 64.1 (104.3) 890.1 48.3 (% of Net Sales) (23.5) (20.1) (25.2) 0.8 6.7 8.3 Interest & other Charges 4.3 13.7 16.0 6.1 4.1 - Other Income 107.8 143.6 124.1 61.0 76.0 92.0 (% of PBT) (148.5) (110.5) (39.0) 83.1 29.8 25.3 Share in profit of Associates - - - - - - Recurring PBT (72.6) (130.0) (318.3) 73.4 255.1 363.6 % chg 98.5 79.0 145.0 (123.1) 247.6 42.5 Extraordinary Expense/(Inc.) 3.4 1.1 30.9 5.6 - - PBT (reported) (76.0) (131.1) (349.2) 67.8 255.1 363.6 Tax 1.0 2.4 3.3 6.4 49.7 70.9 (% of PBT) (1.3) (1.8) (1.0) 9.4 19.5 19.5 PAT (reported) (77.0) (133.5) (352.6) 61.4 205.4 292.7 Add: Share of earnings of associate - - - - - - Less: Minority interest (MI) - - - - - - Prior period items - - - - - - PAT after MI (reported) (77.0) (133.5) (352.6) 61.4 205.4 292.7 ADJ. PAT (77.0) (133.5) (352.6) 61.4 205.4 292.7 % chg 119.8 73.4 164.1-234.2 42.5 (% of Net Sales) (10.3) (10.3) (20.9) 2.8 7.6 8.9 Basic EPS (Rs) (3.2) (5.5) (14.6) 2.5 5.1 7.2 Fully Diluted EPS (Rs) (3.2) (5.5) (14.6) 1.5 5.1 7.2 % chg 68.3 73.4 163.7 (110.4) 234.2 42.5 June 3, 2010 4
Balance Sheet Y/E March FY2007 FY2008 FY2009 FY2010 FY2011E FY2012E SOURCES OF FUNDS Equity Share Capital 240.7 240.7 241.0 241.9 404.5 404.5 Preference Capital - - - - - - Reserves& Surplus (56.1) (212.7) (670.5) (584.1) 34.9 327.6 Shareholders Funds 184.6 28.0 (429.5) (342.2) 439.3 732.0 Minority Interest - - - - - - Total Loans 432.2 540.1 488.8 438.3 - - Deferred Tax Liability - - - - - - Total Liabilities 616.7 568.1 59.4 96.1 439.3 732.0 APPLICATION OF FUNDS Gross Block 62.1 86.5 95.8 263.1 292.0 324.1 Less: Acc. Depreciation 13.7 21.4 28.2 35.9 44.3 53.2 Net Block 48.4 65.1 67.6 227.2 247.7 271.0 Capital Work-in-Progress 694.4 498.9 185.3 164.7 82.3 6.8 Goodwill - - - - - - Investments 81.2 0.4 - - - - Current Assets 479.9 796.9 497.9 597.2 825.6 1,215.7 Cash 351.1 608.1 308.0 450.7 534.9 864.1 Loans & Advances 115.4 176.2 154.3 112.8 248.2 300.2 Inventories 7.9 11.1 12.5 14.7 22.3 27.0 Debtors 5.6 1.6 12.4 19.0 20.1 24.3 Other - - 10.8 - - - Current liabilities 687.1 793.2 691.4 892.9 716.3 761.4 Net Current Assets (207.2) 3.8 (193.5) (295.8) 109.3 454.3 Mis. Exp. not written off - - - - - - Total Assets 616.7 568.1 59.4 96.1 439.3 732.0 Cash Flow Statement Y/E March FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E Profit before tax (183.8) (274.7) (473.3) 6.8 179.1 271.7 Depreciation 5.8 7.8 7.3 7.7 8.4 8.9 Change in Working Capital 488.0 76.9 (179.0) 224.1 11.9 111.8 ADD: Other income 107.8 143.6 124.1 61.0 76.0 92.0 Direct taxes paid 1.0 2.4 3.3 6.4 49.7 70.9 Cash Flow from Operations 416.9 (48.8) (524.3) 293.2 225.7 413.4 Inc./ (Dec.) in Fixed Assets (334.7) 171.1 304.3 (167.3) (28.9) (32.1) Inc./ (Dec.) in Investments (81.2) 80.9 0.4 - - - Inc./ (Dec.) in loans and advances (33.7) (60.8) 21.9 41.5 (135.5) (52.0) Other income/expense 68.7 6.7 (57.8) (24.8) 50.5 - Cash Flow from Investing (380.9) 197.9 268.8 (150.6) (113.9) (84.1) Issue of Equity 240.4-6.6 0.1 54.6 - Inc./(Dec.) in loans 21.7 108.0 (51.3) - (82.2) - Dividend Paid (Incl. Tax) - - - - - - Others - - - - - - Cash Flow from Financing 262.1 108.0 (44.7) 0.1 (27.7) - Inc./(Dec.) in Cash 298.1 257.0 (300.1) 142.7 84.1 329.3 Opening Cash balances 52.9 351.1 608.1 308.0 450.7 534.9 Closing Cash balances 351.1 608.1 308.0 450.7 534.9 864.1 June 3, 2010 5
Key Ratios Y/E March FY2007 FY2008 FY2009 FY2010 FY2011E FY2012E Valuation Ratio (x) P/E (on FDEPS) - - - 38.7 11.6 8.1 P/E (on basic, reported EPS) - - - 23.1 11.6 8.1 P/CEPS - - - 20.6 11.1 7.9 P/BV 7.7 50.5 (3.3) (4.2) 5.4 3.2 Dividend yield (%) - - - - - - Market cap. / Sales 1.9 1.1 0.8 0.7 0.9 0.7 EV/Sales 2.0 1.0 0.9 0.6 0.7 0.5 EV/EBITDA (8.8) (5.3) (3.8) 53.8 9.6 5.4 EV / Total Assets 2.4 2.4 26.9 14.7 4.2 2.1 EV/EBITDAR - - - 3.4 2.9 1.9 Per Share Data (Rs) EPS (Basic) (3.2) (5.5) (14.6) 2.5 5.1 7.2 EPS (fully diluted) (3.2) (5.5) (14.6) 1.5 5.1 7.2 Cash EPS (3.0) (5.2) (14.3) 2.9 5.3 7.5 DPS - - - - - - Book Value 7.7 1.2 (17.8) (14.1) 10.9 18.1 Returns (%) RoCE (Pre-tax) - - - 23.8 68.4 46.4 RoE - - - - - 50.0 Turnover ratios (x) Asset Turnover (Gross Block) 12.4 17.4 18.5 12.2 9.8 10.7 Asset Turnover (Net Block) 15.4 22.8 25.5 14.8 11.4 12.7 Asset Turnover (Total Assets) 1.5 2.2 5.4 28.1 10.2 5.6 Operating Income / Invested Capital 2.8 18.0 (11.7) (7.2) (12.1) (28.9) Inventory / Sales (days) 3 3 3 2 3 3 Receivables (days) 2 1 2 3 3 3 Payables (days) 194 193 139 103 92 80 WC cycle (ex-cash) (days) (155) (164) (120) (104) (79) (46) Solvency ratios (x) Gross debt to equity 2.3 19.3 (1.1) (1.3) - - Net debt to equity 80.7 (2.4) (0.4) 0.0 (1.2) (1.2) Net debt to EBITDA 0.0 0.3 (0.4) (0.5) (2.8) (3.1) Interest Coverage (EBIT / Int.) (41.3) (18.9) (26.6) 3.0 44.6 June 3, 2010 6
Research Team Tel: 022-4040 3800 E-mail: research@angeltrade.com Website: ww.angeltrade.com DISCLAIMER This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Securities Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, and is for general guidance only. Angel Securities Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Securities Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Securities Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Securities Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Disclosure of Interest Statement SpiceJet 1. Analyst ownership of the stock No 2. Angel and its Group companies ownership of the stock No 3. Angel and its Group companies Directors ownership of the stock No 4. Broking relationship with company covered No Note: We have not considered any Exposure below Rs 1 lakh for Angel and its Group companies Address: Acme Plaza, A Wing, 3rd Floor, M.V. Road, Opp. Sangam Cinema, Andheri (E), Mumbai - 400 059. Tel: (022) 3952 4568 / 4040 3800 Angel Broking Ltd: BSE Sebi Regn No : INB 010996539 / CDSL Regn No: IN - DP - CDSL - 234-2004 / PMS Regn Code: PM/INP000001546 Angel Securities Ltd:BSE: INB010994639/INF010994639 NSE: INB230994635/INF230994635 Membership numbers: BSE 028/NSE:09946 Angel Capital & Debt Market Ltd: INB 231279838 / NSE FNO: INF 231279838 / NSE Member code -12798 Angel Commodities Broking (P) Ltd: MCX Member ID: 12685 / FMC Regn No: MCX / TCM / CORP / 0037 NCDEX : Member ID 00220 / FMC Regn No: NCDEX / TCM / CORP / 0302 June 3, 2010 7