SpiceJet

1QFY2011 Result Update | Airlines
July 28, 2010

SpiceJet ACCUMULATE
CMP Rs60
Performance Highlights Target Price Rs65
Particulars (Rs cr) 1QFY2011 1QFY2010 %chg (yoy) 4QFY2010 %chg (qoq) Investment Period 12 Months
Net Sales 708 525 34.9 560 26.5
EBITDA 59 21 177.7 11 445.4 Stock Info
EBITDA Margin (%) 8.3 4.0 425bp 1.9 635bp Sector Airline
Net Profit 55 26 109.6 27 101.1 Market Cap (Rs cr) 1,961
Beta 1.2
Source: Company, Angel research
52 Week High / Low 65/18

SpiceJet has reported higher-than-estimated 1QFY2010 numbers. Net sales grew Avg. Daily Volume 3914265

by 34.9% yoy to Rs708cr (Rs525cr). The company reported 425bp expansion in Face Value (Rs) 10
OPM to 8.3% (4.0%) mainly due to increase in passenger traffic resulting in BSE Sensex 17,957
higher load factors. Net profit increased by 109.6% yoy to Rs55cr (Rs26cr) on the Nifty 5,398
back of better operating efficiency. We maintain an Accumulate on the stock. Reuters Code SPJT.BO
Bloomberg Code SJET@IN
Results above expectation: SpiceJet reported 34.9% yoy growth to Rs708cr
(Rs525cr) mainly on the back of better economic conditions, which led to higher
Shareholding Pattern (%)
load factors, which stood at 88% in 1QFY2011 v/s 76% in 1QFY2010. EBITDAR
margins also expanded by 294bp qoq to 22% (19%). SpiceJet reported OPM of Promoters 12.9

8.3% (4.0%) for the quarter, which expanded by 425bp yoy and was in line of our MF / Banks / Indian Fls 45.1
estimate of 8.3%. Net profit saw a jump of 109.9% yoy to Rs55cr (Rs26cr), which FII / NRIs / OCBs 15.7
was above our estimate of Rs44cr largely due to higher-than-expected revenues Indian Public / Others 26.3
generated during the quarter.

Abs. (%) 3m 1yr 3yr
Outlook and Valuation: SpiceJet is well placed to service future demand with a
current fleet of 21 aircrafts and planned expansion of 7 more by end of FY2012E. Sensex 3.3 17.1 17.9

We expect net sales to post 23% CAGR to Rs3,287cr and net profit to record SpiceJet 2.3 196.8 4.1
118% CAGR to Rs293cr over FY2010-12E. Currently, the stock is trading at 8.3x
FY2012E earnings. Considering the 118% CAGR in earnings over FY2010-12E,
we maintain our Accumulate recommendation on the stock with a Target Price of
Rs65.

Key Financials
Y/E March (Rs cr) 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) 61 205 293
% chg 164.1 (117.4) 234.2 42.5
EBITDA Margin (%) (14.6) 1.5 5.1 7.2
FDEPS (Rs) (24.8) 1.2 7.0 8.5
P/E (x) (4.1) 39.4 11.8 8.3
RoE (%) - - - 50.0
RoCE (%) - 23.8 68.4 46.4
P/BV (x) (3.4) (4.2) 5.5 3.3
Sharan Lillaney
EV/Sales (x) 1.0 0.7 0.7 0.5
022 – 4040 3800 Ext: 338
EV/EBITDA (x) (3.9) 54.8 9.8 5.5
sharanb.lillaney@angeltrade.com
Source: Company, Angel Research

Please refer to important disclosures at the end of this report 1

SpiceJet | 1QFY2011 Result Update

Exhibit 1: 1QFY2011 performance
Particulars (Rs cr) 1QFY2011 4QFY2010 %chg 1QFY2010 %chg FY2010 FY2009 %chg
(qoq) (yoy) (yoy)
Net Sales 708 560 26.5 525 34.9 2,181 1,689 29.1
Total Expenditure 649 549 18.3 504 28.9 2,155 2,109 2.2
EBITDA 59 11 445.4 21 177.7 26 (419) -
EBITDA Margin (%) 8.3 1.9 635 4.0 425 1.2 (24.8) -
EBITDAR 154.5 105.7 46.2 121 27.5 416.0 (60.2) -
EBITDAR Margin (%) 21.8 18.9 294 23.1 (127) 19.1 (3.6) -
Depreciation 2 2 6.7 2 2.9 8 7 5.6
EBIT 57 9 538.2 19 195.5 19 (426) -
Interest 1 1 (5.7) 2 (24.1) 6 16 (61.8)
Other Income* 14 26 (47.8) 10 42.7 55 93 (40.5)
PBT 69 34 103.9 27 155.1 67.8 (349.2) -
Tax 14 6 115.9 1 1,900.7 6.4 3.3 91.8
Net Profit 55.2 27.5 101.1 26.3 109.6 61.4 (352.6) -
NPM (%) 7.8 4.9 290 5.0 278 2.8 (20.9) -
Diluted EPS (Rs) 1.4 0.7 101.1 0.7 109.6 1.5 (8.7) -
Source: Company, Angel Research, Note: * Other Income-Prior period adjustment

Exhibit 2: 1QFY2011- Actual v/s Angel estimates
(Rs cr) Estimates Actual Variation
Net Sales 642 708 10.3
EBITDA 53 59 10.5
EBITDA Margin (%) 8.3 8.3 0.1
Tax 8 14 77.2
Net Profit 44 55 25.7

Exhibit 3: Operating Parameters
%chg %chg
1QFY2011 1QFY2010 (yoy) 4QFY2010 (qoq)
ASKM (mn) 2,367 2,177 8.7 2,134 10.9
Block Hours 23,007 20,772 10.8 20,664 11.3
Departures 12,181 10,974 11.0 10,933 11.4
Pax Carried 2,064,744 1,604,707 28.7 1,669,883 23.6
Average No. of Aircrafts 20.3 19.0 6.8 19.0 6.8
Fuel Cost/KL (Rs) 37,578 30,337 23.9 35,009 7.3
Average Seat Revenue (Rs) 3,428 3,270 4.8 3,351 2.3
Load Factor (%) 88 76 15.8 80 10.0
Revenue/ASKM (Rs) 3.0 2.4 24.1 2.6 14.1

July 28, 2010 2


Revenues up 34.9%, substantially above expectation: The company’s net sales
grew by 34.9% yoy to Rs708cr (Rs525cr) for the quarter, driven by strong
passenger growth, which increased by 29% yoy to 2.06mn Pax (1.6mn Pax). On
qoq basis, the company managed a substantial 26.5% growth in revenues which
was above our estimates of Rs642cr. During the quarter, departures increased by
11% yoy to 12,181 (10.974) largely due to the addition of two new aircraft during
the year. The average number of aircraft increased from 19 to 20.3 during the
quarter.

Exhibit 4: Sales trend
(Rs cr) (%)
800 50
700 40
708
600 642 30
500 560
525 20
400 449
10
300
0
200
100 -10

- -20
1QFY2010 2QFY2010 3QFY2010 4QFY2010 1QFY2011
Net Sales (LHS) Growth qoq Growth yoy


OPM expanded yoy on back of higher load factors: SpiceJet reported OPM of
8.3% (4.0%) for the quarter, which expanded by 425bp and was in line with our
estimate of 8.3%. On a qoq basis too, the company managed to increase its OPM
by 635bp on back of higher load factors to 88% ( 80% in 4QFY2010 and 76% in
1QFY2010), which resulted in an increase in Revenue/ASKM, which stood at
Rs2.99 v/s Rs2.62 in 4QFY2010.

Exhibit 5: OPM trend

20
15
10
5
0
(%)

(5) 1QFY2010 2QFY2010 3QFY2010 4QFY2010 1QFY2011
(10)
(15)
(20)
(25)
(30)


July 28, 2010 3


Bottom-line increased on improved operating efficiency: In 1QFY2010, SpiceJet
reported net profit of Rs55cr (Rs26cr), up 109.6% yoy, on the back of higher
revenues generated during the quarter due to higher load factors. On a qoq basis
also net profit jumped by 101.1% as 4Q is usually the weakest quarter in a fiscal
for the airline industry.

Exhibit 6: Strong turnaround in net profit
(Rs cr) (%)
150 20
15
100
10
50 5
0
-
(5)
1QFY2010 2QFY2010 3QFY2010 4QFY2010 1QFY2011
(50) (10)
(15)
(100)
(20)
(150) (25)
Net Profit (LHS) NPM (RHS)


July 28, 2010 4


Investment Rationale
Load factors expected to remain healthy: Driven by huge losses, most airlines
reduced their fleet and no new capacities were added since FY2009. With FCCs
like Air India and Kingfisher still making huge losses, and Jet Airways barely
breaking even, we expect negligible fleet additions over FY2011-12E. But demand
had bounced back sharply in FY2010 and the low-cost carriers (LCCs) have been
reporting 80%+ load factors. Given that the demand is expected to outpace
supply, the load factor for the whole industry is expected to remain around 77% for
FY2011E.

Higher load factor to increase profitability: With the aviation industry is
characterised by very high operating leverage, an improvement in the load factor
is expected to drive a substantial spurt in profit. With 88% (76%) load factor,
SpiceJet's net profit shot up to Rs55cr in 1QFY2011 v/s Rs26cr in 1QFY2010.
Additionally, aided by strong fleet addition (19% CAGR over FY2010-12E), we
expect SpiceJet's net profit to post 118% CAGR in the mentioned period to
Rs293cr.

Increasing fleet and strengthening balance sheet: SpiceJet currently has 21 aircraft
and is one of the few airline companies that will expand its fleet size in the coming
years. It is expected to add another 7 aircraft by FY2012E - three in FY2011E and
four in FY2012E. The company has also placed an order for another 30 aircraft,
which will be delivered during 2014 - 2018. We also estimate the company to
build strong cash reserve of Rs535cr in FY2011E and Rs864cr by FY2012E. In a
worst-case scenario, even if SpiceJet witnesses a load factor of just 50% (lowest
load factor till date of 67% in FY2009), it would have enough cash to sustain its
operational expenditure for seven months, without diluting equity. As most of the
US $79.8mn FCCBs are converted and the remaining will be converted by
December 2010, the company’s balance sheet will only further strengthen, with a
net worth of Rs732cr in FY2012E.

Outlook and Valuation

SpiceJet is well placed to service future demand with its current fleet of 21 aircraft
and planned expansion of seven more by end of FY2012E. We expect net sales to
post 23% CAGR to Rs3,287cr and net profit to record 118% CAGR to Rs293cr over
FY2010-12E. Currently, the stock is trading at 8.3x FY2012E earnings.
Considering the 118% CAGR in earnings over FY2010-12E, we maintain an
Accumulate on the stock, with a Target Price of Rs65

Exhibit 7: Key assumptions
Estimates
(%) FY2011 FY2012
Sales Growth 24.6 20.9
Load Factor 79.0 79.0
EBITDAR Margins 23.3 24.8
EBITDA Margins 7.0 8.5
Net Profit Margins 7.6 8.9

July 28, 2010 5


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
% 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 187 345 476 512 585 675
Personnel 97 143 155 182 211 255
Other 89 103 173 257 277 318
EBITDA (170) (252) (419) 26 192 281
% chg 226.8 47.9 66.3 - 632.5 46.4
(% of Net Sales) (22.7) (19.5) (24.8) 1.2 7.0 8.5
Depreciation& Amortisation 6 8 7 8 8 9
EBIT (176) (260) (426) 19 183 272
% chg 192.3 47.5 64.1 - 890.1 48.3
(% of Net Sales) (23.5) (20.1) (25.2) 0.8 6.7 8.3
Interest & other Charges 4 14 16 6 4 -
Other Income 108 144 124 61 76 92
(% of PBT) (148) (110) (39) 83 30 25
Recurring PBT (73) (130) (318) 73 255 364
% chg 98.5 79.0 145.0 (123.1) 247.6 42.5
Extraordinary Expense/(Inc.) 3 1 31 6 - -
PBT (reported) (76) (131) (349) 68 255 364
Tax 1 2 3 6 50 71
(% of PBT) (1.3) (1.8) (1.0) 9.4 19.5 19.5
PAT (reported) (77) (134) (353) 61 205 293
ADJ. PAT (77) (134) (353) 61 205 293
% chg 119.8 73.4 164.1 (117.4) 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

July 28, 2010 6


Balance Sheet

SOURCES OF FUNDS
Equity Share Capital 240.7 240.7 241.0 241.9 404.5 404.5
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
Total Loans 432.2 540.1 488.8 438.3 - -
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
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
Total Assets 616.7 568.1 59.4 96.1 439.3 732.0

July 28, 2010 7


Cash flow Statement
Y/E March FY07 FY08 FY09 FY10E FY11E FY12E
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) -
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

July 28, 2010 8


Key Ratios
Valuation Ratio (x)
P/E (on FDEPS) (18.7) (10.8) (4.1) 39.4 11.8 8.3
P/E (on basic, reported EPS) (18.7) (10.8) (4.1) 23.5 11.8 8.3
P/CEPS (20.2) (11.4) (4.2) 20.9 11.3 8.0
P/BV 7.8 51.4 (3.4) (4.2) 5.5 3.3
Dividend yield (%) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Market cap. / Sales 1.9 1.1 0.9 0.7 0.9 0.7
EV/Sales 2.0 1.1 1.0 0.7 0.7 0.5
EV/EBITDA (8.9) (5.4) (3.9) 54.8 9.8 5.5
EV / Total Assets 2.5 2.4 27.3 14.9 4.3 2.1
EV/EBITDAR (67.2) 2,331.8 (26.9) 3.4 3.0 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
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 2 3
Receivables (days) 2 1 2 3 3 2
Payables (days) 194 193 139 103 92 80
Working capital cycle (ex-cash) (days) (155) (164) (119) (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 / Interest) (41.3) (18.9) (26.6) 3.0 44.6

July 28, 2010 9


Research Team Tel: 022 - 4040 3800 E-mail: research@angeltrade.com Website: www.angeltrade.com

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Disclosure of Interest Statement SpiceJet
1. Analyst ownership of the stock No
2. Angel and its Group companies ownership of the stock Yes
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, its Group companies and Directors.

Ratings (Returns) : Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)
Reduce (-5% to 15%) Sell (< -15%)

July 28, 2010 10

SpiceJet

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