2QFY2012 Result Update | Airlines

November 16, 2011

SpiceJet
Performance Highlights
Particulars (` cr) Net sales EBITDA EBITDA margin (%) Net profit 2QFY2012 766 (232) (30.2) (240) 2QFY2011 %chg (yoy) 628 4 0.6 10 22.0 (6,597) (3,081)bp (2,474) 1QFY2012 933 (80) (8.5) (72) %chg (qoq) (17.8) 191 (2,171)bp 234

NEUTRAL
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Airlines 934 1.3 93 / 19 3,563,451 10 16,776 5,030 SPJT.BO SJET@IN

`21 -

Source: Company, Angel Research

For 2QFY2012, SpiceJets net sales grew by 22.0% yoy to `766cr. EBITDA margin came in at negative 30.2%. At the EBITDA level, the company witnessed a loss of `232cr. Consequently, the company reported net loss of `240cr during the quarter. We remain Neutral on the stock. Strong top-line growth, while margin declines: SpiceJet reported strong growth of 22.0% yoy on the back of capacity additions during the year. EBITDAR margin declined by 2,947bp yoy to negative 12.3% and EBITDA margin declined by 3,081bp yoy to negative 30.2%, owing to higher fuel cost during the quarter. The company could not raise ticket prices as much as fuel cost due to stiff completion from FCC players, who were reducing prices to increase load factors and gain market share. The company registered loss of `240cr in 2QFY2012 compared to profit of `10cr in 2QFY2011. Outlook and valuation: SpiceJet currently has a fleet of 30 aircraft and will add another two Boeing aircraft, which will take its Boeing capacity to 32 aircraft by FY2012. The company will also add 11 Bombardier aircraft by the end of FY2012, starting from September this year. In FY2013, the company will further add five Boeing aircraft and four Bombardiers. By the end of FY2013, the total tally would be 37 Boeings and 15 Bombardiers as per current expansion plans. We expect net sales to post a 36.8% CAGR to `5,489cr over FY201113. Owing to higher ATF prices and intense competition, we have a cautious view on the sector and, thus, remain Neutral on the stock.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 38.6 28.1 7.6 25.7

Abs. (%) Sensex SpiceJet

3m 0.3 (11.9)

1yr (15.6) (74.2)

3yr 80.4 63.2

Key financials
Y/E March (` cr) Net Sales % chg Net Profit % chg FDEPS (`) EBITDA Margin (%) P/E (x) P/CEPS (x) RoE (%) P/BV (x) EV/Sales (x) EV/EBITDAR (x)
Source: Company, Angel Research

FY2010 2,181 29.1 61.4 1.5 1.2 8.3 7.4 (1.5) 0.2 1.2

FY2011 2,934 34.5 101.2 64.7 2.5 3.9 8.5 7.8 2.7 0.3 1.4

FY2012E 4,165 41.9 (292.0) (388.7) (6.6) (6.1) (3.2) (3.6) 5.8 0.4 5.0

FY2013E 5,489 31.8 (117.8) (59.7) (2.7) (0.5) (7.9) (15.6) 22.0 0.3 2.8

Sharan Lillaney
022 3935 7800 Ext: 6811 sharanb.lillaney@angelbroking.com

Please refer to important disclosures at the end of this report

SpiceJet | 2QFY2012 Result Update

Exhibit 1: 2QFY2012 performance

Particulars (` cr) Net Sales Total Expenditure EBITDA EBITDA Margin (%) EBITDAR EBITDAR Margin (%) Depreciation EBIT Interest Other Income* PBT Tax Minority Interest Net Profit NPM (%) Diluted EPS (`) 2QFY2012 766.5 998.3 (232) (30.2) (94.3) (12.3) 3.7 (235.5) 8.9 4.3 (240.1) (240.1) (31.3) (5.9) 2QFY2011 628.2 624.6 4 0.6 107.8 17.2 2.2 1.4 1.4 12.6 12.6 2.5 10.1 1.6 0.2 %chg (yoy) 22.0 59.8 (6,597) (3,081)bp (187.5) (2,947)bp 69.3 547.3 (65.9) (2,000.5) (2,474) (3,293) bp (2,474) 1QFY2012 932.8 1,012.4 (79.6) (8.5) 52.4 5.6 2.5 (82.1) 6.0 16.1 (72.0) (72.0) (7.7) (1.8) %chg (qoq) (17.8) (1.4) 191 (2,171) bp (280) (1,792)bp 46.2 186.8 48.0 (73.3) 234 234 (2,361) bp 234 1HFY2012 1,699 2,011 (311.4) (18.3) (42) (2.5) 6 (317.6) 15 20 (312.0) (312.0) (18.4) (7.7) 1HFY2011 1,336 1,274 62.1 4.6 262 19.6 4 57.9 3 26 81.6 16 65.3 4.9 1.6 %chg (yoy) 27.2 57.8 (602) (2,297) bp (116) (2,210)bp 49.0 452 (22.5) (482) (100.0) (578) (2,325) bp (578)

Source: Company, Angel Research, * Other income prior-period adjustment

Strong top-line growth: For 2QFY2012, SpiceJets net sales grew by 22.0% yoy to `766cr (`933cr), driven by strong capacity additions and passenger growth, which increased by 28.0% yoy. On a qoq basis, net sales declined by 17.8%, which was expected as the second quarter is usually leaner when compared to the first quarter for the airline industry. Load factors came in at 67.4%, down by 8.4% on a yoy basis.

Exhibit 2: Sales trend

(` cr) 1,000 900 800 700 600 500 400 300 200 100 (%) 50 933 830 628 759 766 40 30 20 10 0 -10 -20 -30 2QFY2011 3QFY2011 Net Sales (LHS)
Source: Company, Angel Research

4QFY2011

1QFY2012

2QFY2012

Growth qoq

Growth yoy

November 16, 2011

SpiceJet | 2QFY2012 Result Update

EBITDA margin declines yoy on higher fuel cost: SpiceJets EBITDA margin declined by 3,081bp yoy to negative 30.2% for the quarter, mainly on account of higher ATF prices during the quarter, which increased to 62.4% as a percentage of sales compared to 41.5% in 2QFY2011 and 54.2% in 1QFY2012.

Exhibit 3: OPM declines on the back of higher ATF prices

(` cr) 1,000 900 800 700 600 500 400 300 200 100 (%) 50 933 830 628 759 766 40 30 20 10 0 -10 -20 -30 2QFY2011 3QFY2011 Net Sales (LHS)
Source: Company, Angel Research

4QFY2011

1QFY2012

2QFY2012

Growth qoq

Growth yoy

Bottom line declines due margin compression: SpiceJet reported net loss of `240cr in 2QFY2012 compared to. profit of `10cr in 2QFY2011, largely due to EBITDA margin compression. Consequently, PAT margin declined to negative 31.3%.

Exhibit 4: Huge yoy decline in NPM

(` cr) 120 100 80 60 40 20 (20) (40) (60) (80) (100)
Source: Company, Angel Research
55 10.1 94.4

(%) 15 10 5 0 (5) (10)

1QFY2011

2QFY2011

3QFY2011

4QFY2011
(58.6)

1QFY2012
(72.0)

Net Profit (LHS)

NPM (RHS)

November 16, 2011

SpiceJet | 2QFY2012 Result Update

Exhibit 5: Key assumptions

Estimates (%) Sales growth Load factor EBITDAR margin EBITDA margin Net profit margin
Source: Company, Angel Research

FY2012 41.9 77.0 7.4 (6.1) (6.7)

FY2013 31.8 77.0 11.9 (0.5) (1.7)

Outlook and valuation

SpiceJet currently has a fleet of 30 aircraft and will add another two Boeing aircraft, which will take its Boeing capacity to 32 aircraft by FY2012. The company will also add 11 Bombardier aircraft by the end of FY2012, starting from September this year. In FY2013, the company will further add five Boeing aircraft and four Bombardiers. By the end of FY2013, the total tally would be 37 Boeings and 15 Bombardiers as per current expansion plans. We expect net sales to post a 36.8% CAGR to `5,489cr over FY201113. Owing to higher ATF prices and intense competition, we have a cautious view on the sector and, thus, remain Neutral on the stock.

November 16, 2011

SpiceJet | 2QFY2012 Result Update

Profit & loss statement

Y/E March (` cr) Total operating income % chg Total Expenditure Fuel & Oil Other Mfg costs Personnel Other EBITDA (% of Net Sales) Depreciation& Amortisation EBIT % chg (% of Net Sales) Interest & other Charges Other Income (% of PBT) Share in profit of Associates Recurring PBT % chg Extraordinary Expense/(Inc.) PBT (reported) Tax (% of PBT) PAT (reported) Add: Share of earnings of associate Less: Minority interest (MI) Prior period items PAT after MI (reported) ADJ. PAT % chg (% of Net Sales) Basic EPS (`) Fully Diluted EPS (`) % chg FY2009 FY2010 1,689.4 2,181.1 30.5 2,109 945 476 155 173 (419) (24.8) 7 (426) 64.1 (25.2) 16 124 (39) (318) 145.0 31 (349) 3 (1.0) (353) (353) (353) 164.1 (20.9) (14.6) (14.6) 163.7 29.1 2,155 814 512 182 257 26 1.2 8 18 0.8 6 61 83 73 (123.0) 6 68 6 9.4 61 61 61 (117.4) 2.8 2.5 1.5 (110.4) FY2011 FY2012E FY2013E 2,934.4 34.5 2,819 1,226 599 241 324 116 3.9 9 107 477.8 3.6 5 26 20 128 74.7 2 126 25 19.6 101 101 101 64.7 3.4 2.5 2.5 64.7 4,164.6 41.9 4,420 2,262 817 341 437 (256) (6.1) 30 (286) (367.5) (6.9) 44 37 (13) (292) (327.9) (292) (292) (292) (292) (388.7) (7.0) (6.6) (6.6) (365.1) 5,489.1 31.8 5,517 2,772 1,049 445 570 (28) (0.5) 58 (86) (69.9) (1.6) 59 27 (23) 1 (118) (59.7) (118) (118) (118) (118) (59.7) (2.1) (2.7) (2.7) (59.7)

November 16, 2011

SpiceJet | 2QFY2012 Result Update

Balance sheet
Y/E March SOURCES OF FUNDS Equity Share Capital Reserves& Surplus Shareholders Funds Total Loans Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Investments Current Assets Cash Loans & Advances Inventories Debtors Other Current liabilities Net Current Assets Total Assets 96 28 68 185 498 308 154 12 12 11 691 (193) 59 263 36 227 165 597 451 113 15 19 893 (296) 96 292 45 247 451 411 192 182 20 17 703 (291) 407 1,392 75 1,317 473 188 215 34 36 845 (371) 946 1,792 133 1,659 535 159 284 45 48 1,116 (581) 1,078 241 (670) (429) 489 59 242 (584) (342) 438 96 405 (84) 321 86 407 441 (281) 160 786 946 441 (399) 42 1,036 1,078 FY2009 FY2010 FY2011 FY2012E FY2013E

November 16, 2011

SpiceJet | 2QFY2012 Result Update

Cash flow statement

Y/E March (` cr) Profit before tax Depreciation Change in Working Capital ADD: Other income Direct taxes paid Cash Flow from Operations Inc./ (Dec.) in Fixed Assets Inc./ (Dec.) in loans and advances Other income/Expense Cash Flow from Investing Issue of Equity Inc./(Dec.) in loans Cash Flow from Financing Inc./(Dec.) in Cash Opening Cash balances Closing Cash balances FY2009 FY2010E FY2011 FY2012E FY2013E (473.3) 7.3 (179.0) 124.1 3.3 (524.3) 304.3 21.9 (57.8) 268.8 6.6 (51.3) (44.7) (300.1) 608.1 308.0 6.8 7.7 203.5 61.0 6.4 272.6 (139.1) 41.5 (32.4) (130.0) 0.1 0.1 142.7 308.0 450.7 93.0 8.9 (194.0) 23.9 24.7 (92.9) (306.3) (68.9) (7.8) (383.0) 163.4 54.0 217.4 (258.5) 450.7 192.2 (86.9) 30.0 121.7 38.7 (3.6) 107.1 (619.1) (42.0) 0.0 (661.1) 400.0 400.0 (154.0) 192.2 38.2 (20.6) 58.0 253.4 28.5 12.8 306.4 (342.0) (71.1) (0.0) (413.1) 100.0 100.0 (6.7) 38.2 31.5

November 16, 2011

SpiceJet | 2QFY2012 Result Update

Key ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/E (on basic, reported EPS) P/CEPS P/BV Market cap. / Sales EV/Sales EV/EBITDA EV / Total Assets EV/EBITDAR Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS Book Value Turnover ratios (x) Asset Turnover (Gross Block) Asset Turnover (Net Block) Asset Turnover (Total Assets) Operating Income / Invested Capital Inventory / Sales (days) Receivables (days) Payables (days) Working capital cycle (ex-cash) (days) Solvency ratios (x) Gross debt to equity Net debt to equity Net debt to EBITDA Interest Coverage (EBIT / Interest) (1.1) (0.4) (0.4) (26.6) (1.3) 0.0 (0.5) 3.0 0.3 (0.3) (0.9) 22.1 4.9 3.7 (2.3) (6.6) 24.4 20.7 (31.2) (1.5) 18.5 25.5 5.4 (11.7) 3 2 139 (119) 12.2 14.8 28.1 (7.2) 2 3 103 (104) 10.6 12.4 11.7 (42.0) 2 2 86 (77) 4.9 5.3 6.2 8.6 2 2 68 (46) 3.4 3.7 5.4 6.5 3 3 64 (43) (14.6) (14.6) (14.3) (17.8) 2.5 1.5 2.9 (14.1) 2.5 2.5 2.7 7.9 (6.6) (6.6) (5.9) 3.6 (2.7) (2.7) (1.4) 1.0 (1.4) (1.4) (1.5) (1.2) 0.3 0.4 (1.6) 11.6 (11.5) 14.0 8.3 7.4 (1.5) 0.2 0.2 19.1 5.2 1.2 8.5 8.5 7.8 2.7 0.3 0.3 6.5 1.8 1.4 (3.2) (3.2) (3.6) 5.8 0.2 0.4 (6.0) 1.6 5.0 (7.9) (7.9) (15.6) 22.0 0.2 0.3 (64.5) 1.7 2.8 FY2009 FY2010 FY2011E FY2012E FY2013E

November 16, 2011

SpiceJet | 2QFY2012 Result Update

Research Team Tel: 022 3935 7800

E-mail: research@angelbroking.com

Website: www.angelbroking.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 Broking 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, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking 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 Broking 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 Broking 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 Broking 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). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.

Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

SpiceJet No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors.

Ratings (Returns) :

Buy (> 15%) Reduce (-5% to 15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

November 16, 2011