Brokerage house Antique Stock Broking has maintained its "buy" rating on SpiceJet with a price target of Rs 60 for the stock. The broking firm believes the Jet Airways -Etihad deal has the potential to re-rate aviation industry in India and SpiceJet could see substantial upside from current levels.
"The strong premium by foreign player signals the interest in latent growth Indian aviation market and we believe Spicejet is the next best candidate among the listed players to attract investments considering country's growing aviation market with strong promoter support and its lean balance sheet. The company has gained market share from 12 percent in the financial year 2010 to 19.2 percent in third quarter of financial year 2013. It is expected to continue to outperform domestic market with higher load factor and growing fleet," said the Antique note to clients.
"The company has very high sensitivity with fuel cost as it currently accounts for 45-50 percent of its sales. Considering relatively fixed nature of other cost, the full year profit for FY14 has delta of Rs 40 crore for rupee 1 per litre change in domestic fuel cost. We believe with increasing market share, focus on operational efficiency and relatively strong balance sheet should re-rate the valuations of the company," said the note.
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