SpiceJet Ltd’s September quarter net profit missed some analysts’ estimates. Still, its net profit of Rs105 crore, representing almost 80% year-on-year growth, is nothing to complain about. Robust revenue growth, strong other income growth and decline in finance costs are factors that boosted net profit. SpiceJet reckons last quarter’s net profit was its highest ever for any September quarter, which is typically a lean one for airlines.
The airline’s revenue for the September quarter increased 30% over the same period last year to Rs1,814 crore. According to SBICAP Securities Ltd, revenue growth came on the back of 23% volume growth and a 6% increase in pricing. RASK or revenue per available seat kilometre increased 7% year-on-year. RASK is a unit revenue measure for airlines.
Ebitdar increased 25% to Rs397 crore. Ebitdar is short for earnings before interest, tax, depreciation, amortization and lease rentals, and is a key measure of profitability for airlines.
The SpiceJet stock has been flying high and so far this fiscal year (FY18), it has risen nearly two-fifths, much more than the gain in the S&P BSE 500 index.
But crude oil prices are definitely at uncomfortable levels at present. Fuel costs account for a big portion of overall costs and lately, crude oil prices have been on a firm footing.
SBICAP Securities believes the near-term stock performance will be guided by trends in traffic growth in a rising crude oil price environment. With crude oil price assumption of $55-60 per barrel, earnings growth could mirror traffic growth of 16-18% over the medium term, added the broker in a report on Monday.
The airline has launched its fourth daily flight under the UDAN scheme, aimed at encouraging regional connectivity. Investors should watch for the progress on this front in the coming days and how the regional thrust shapes up for SpiceJet.
Still, the considerable outperformance in the stock this year may mean investors are factoring in most of the positives, thus capping meaningful gains here on. According to Bloomberg data, the SpiceJet stock currently trades at 14 times estimated earnings for FY18. In comparison, shares of bigger rival InterGlobe Aviation Ltd (IndiGo) trade at 20 times expected FY18 earnings.