SpiceJet Result update: Q1FY24

Company Overview:

SpiceJet Ltd, a holding company incorporated on February 9, 1984, is a prominent player in the Indian aviation industry. It primarily operates in the air transport sector, providing passenger and cargo services. In the domestic aviation market, SpiceJet holds the second-largest market share of approximately 13%, while it maintains a similar market share in the international aviation market among domestic players, ranking as the third-largest, trailing Air India and Indigo Airlines. Notably, SpiceJet is the largest cargo operator in India. The company’s extensive network covers 53 domestic and 12 international destinations for its passenger services and a remarkable 107 destinations for its cargo business, making it India’s leading passenger airline concerning regional connectivity.

 Revenue breakdown and Valuation:

 SpiceJet’s revenue structure is diversified, with the air transport segment contributing around 71% of its revenues, encompassing passenger transport both domestically and internationally. The remaining 21% of its revenues come from Freight & Logistics Services, which include its cargo operations under the brand name Spice Xpress, offering cargo connectivity across India and internationally. As for valuation, the stock currently trades at a negative Price-to-Earnings (PE) ratio, with a share price of 40 Rs. The Return on Capital Employed (ROCE) stands at -24.4%, reflecting financial challenges. The current ratio is 0.22, indicating potential liquidity concerns, and the interest coverage ratio is -0.02, signaling difficulties in covering interest expenses. The Enterprise Value-to-EBITDA (EV/EBITDA) ratio is 10.4.

Q1FY24 Results Updates:   

In the most recent quarterly update, SpiceJet’s standalone revenue experienced an 18.52% YoY decrease (-6.67% QoQ) to 20,017 million Rs., largely attributed to a substantial 70% reduction in freighter and logistics services (-10% in air transport services). Nevertheless, the company managed to improve its EBITDA by 1.6x YoY (133x QoQ) to 2,675 million Rs. due to a remarkable 37% reduction in operating costs. EBITDA margins stood at 13.37% (PQ- 0.09%), demonstrating improved operational efficiency. Furthermore, EBIT grew by 108% YoY (127% QoQ) to 603 million Rs., primarily driven by a 26% fall in depreciation expenses, resulting in EBIT margins improving to 3.01% (PQ- -10%). Profits After Tax (PAT) witnessed significant growth, increasing by 125% YoY (12x QoQ) to 2,024 million Rs., thanks to a 12.3x increase in other income from non-core business activities. Earnings Per Share (EPS) stood at 3.39 Rs (PQ-0.28 Rs), reflecting a 125% YoY growth.

Conclusion:

SpiceJet Ltd, a key player in the Indian aviation industry, has shown significant resilience and adaptability in its financial performance. Despite challenges in the aviation sector, the company managed to improve its operational efficiency in Q1FY24, leading to substantial growth in EBITDA and PAT. However, it still faces financial hurdles, as evident from its negative PE ratio, low current ratio, and negative interest coverage ratio. The company’s cargo operations and regional passenger connectivity remain strengths in its portfolio, but it will need to address its financial stability to ensure long-term sustainability in a highly competitive market.