Edelweiss retained its bullish outlook on SpiceJet Ltd., impressed by the company's refurbished strategy that helped it clock profits in 10 consecutive quarters from a near collapse.
The brokerage added that SpiceJet's corrective measures, in the form of dislodging a significant portion of its overdue obligations to statutory authorities and negotiating deferred payment plans with vendors has helped it improve growth prospects.
In the near future, Edelweiss anticipates large order of 205 737 MAX aircrafts to aid growth. Operating cost is likely to fall with 15 percent fuel savings and lower maintenance and ownership costs might dip as well due to SpiceJet's ‘staying asset light' target.
Favourable Dynamics For Near-Term Progress:
- Under the Regional Connectivity Scheme ‘UDAN', the airline's under-penetration is expected to improve
- Continuing fall in aviation turbine fuel prices is expected to continue, increasing demand
- Proposed new airport at Mumbai and new terminal at Delhi will ease slot constraints
Edelweiss Estimates:
- Revenue per km to grow at a compounded annual growth rate of 18 percent
- Earnings per share to rise at 49 percent CAGR
- Warrants dilution estimated at reduced rate of 16 percent, versus 32 percent earlier
- Enterprise value to earnings before interest, tax, depreciation, amortisation and rent cost ratio raised to 8.5 times versus eight times previously
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