SpiceJet share price fell over 2% in trade today after HSBC cut target price for the airline stock citing weak Q2 earnings and rising costs. SpiceJet share price lost 2.12% to Rs 103.60 compared to the previous close of Rs 105.85 on BSE. The mid cap stock has fallen nearly 5% in last two days.
However, SpiceJet share has gained 28.22% in last one year and risen 17.66% since the beginning of this year. The brokerage said gave a hold rating to the stock and cut its target price to Rs 115 from Rs 130. HSBC said Q2 earnings of SpiceJet were worse than expected.
The profitability of the airline in second half of this fiscal is likely to be affected by subdued yield and rising costs. The brokerage cut FY20 profit estimate for the airline by 27%. In the second quarter of current fiscal, SpiceJet, the country's second-largest airline, reported widening of net loss to Rs 462.6 crore on account of higher costs with respect to grounding of Boeing 737 MAX planes and changes in accounting norms.
The Gurgaon-headquartered airline had reported a net loss of Rs 389.4 crore in the September quarter of last fiscal. However, revenue from operations rose 51.76 per cent to Rs 2,845.3 crore in Q2FY20 from Rs 1,874.8 crore in Q2FY19, as the airline added more destinations and expanded its fleet of passenger and freighter aircraft.
The company said in the exchange filing that the loss during the September quarter was mainly on account of inflated costs with respect to MAX grounding and a seasonally weak quarter. The figure includes a "loss of Rs 180.3 crore on account of accounting standard Ind AS 116", which come into force from April 1, 2019.
"With the grounding of Boeing 737 MAX, the company continues to incur various costs and losses with respect to these aircraft. The company is in the process of determining the costs and losses (including opportunity losses) incurred by it and has initiated the process of seeking reimbursements and claims from the Aircraft manufacturer," the company said in the filing.
During the quarter under review, total expenditure increased to Rs 3,537.48 crore from Rs 2,286.65 crore in the corresponding period last year, led by rise in aircraft fuel and airport charges. Aircraft fuel charges rose 37.51 per cent year-on-year (YoY) to Rs 1,162.09 crore, while airport lease rental increased by 63 per cent YoY to Rs 292.44 crore. Aircraft maintenance cost increased 43.92 per cent year-on-year (YoY) to Rs 292.44 crore in the September quarter.
By Aseem Thapliyal