Shares of SpiceJet gained over 15% intraday on Thursday after the US Federal Aviation Administration (FAA) gave green-signal to fly Boeing 737 Max aircraft after two-years of grounding. SpiceJet is the sole operator of Boeing 737 Max planes in India with 13 aircraft in its fleet, apart from the grounded Jet Airways.
Following the positive news, SpiceJet shares opened with a gain of 2.86% today at Rs 68.25 and climbed to an intraday high of Rs 76.80, rising 15.75%% on BSE as compared to the previous closing price of Rs 66.35.
SpiceJet stock has risen 36.55% returns in the last 4 days. The stock has risen 35% in one week and over 53% in one month. However, it has fallen 34% year-to-date. SpiceJet is trading higher than 5, 20, 50, 100 and 200-day moving averages. Market capitalization of the airline stands at Rs 4,463.04 crore.
On Wednesday, US aviation safety regulator-- US FAA -- cleared Boeing's 737 Max plane to fly again, lifting grounding orders put in place in March 2019 after two deadly crashes.
As per Brokerage Edelweiss Capital, a higher capacity of 737Max (220 seats versus 180 in 737NG) along with greater fuel efficiency will boost SpiceJet's competitiveness.
HSBC also had upgraded the stock to 'Buy' from 'Hold' with a revised target price of Rs 80 from Rs 26.5. The global brokerage house in its recent report dated November 17 said, "The company expects 737 Max to return to operations by Q1 2021. Once 737 Max returns to operations, SpiceJet could start receiving incentives as part of the sales and leaseback agreement. Although it is difficult to speculate, its recent deal to lease two A330 gives us some confidence. Boeing might also provide support as SpiceJet's survival is crucial for Boeing to have a continued presence in India," it said in the report.
On SpiceJet- Q2FY21 result- Centrum Broking said in its note," SpiceJet has so far accounted for a claim of Rs9.5bn from Boeing for grounding of Max aircraft. With Max aircrafts expected to resume flying in Q4FY21, we expect a settlement of SpiceJet's claims by Mar-21 and build-in 75% cash payment and balance 25% by way of future credits. This should provide material relief to SpiceJet. In FY22 we estimate SpiceJet should be current on its payment obligations and also be able to unwind Rs6bn of deferred payments from its internal accruals. We value SpiceJet at Rs89/share based on 8.8x FY22E EBITDAR and upgrade our recommendation to Buy from Sell. Key risks include sharply lower traffic recovery, adverse fall out of pending litigation in dispute with the Marans, and lawsuit filed in the UK by lessors for Rs2bn (as per media articles)."
SpiceJet stock price closed 12.06% higher at Rs 74.35 on BSE today.