SpiceJet shares zoom 20% to hit upper circuit; here's what fuelling the surge

Shares of budget carrier SpiceJet Ltd rose sharply in Wednesday's trade, extending their gains for the fourth straight session. The stock today surged 20 per cent to hit its upper price band of Rs 39.70. Today's sharp upward move in the share price came after the airline said it has obtained extension up to three months from the Registrar of Companies (RoC), under Section 96 of the Companies Act, 2013, for conducting the annual general meeting (AGM) for the financial year ended March 31, 2023 (FY23). Accordingly, the AGM for FY23 will be held on or before December 31, 2023, the airline added.

Recently, the cash-strapped carrier has announced the allotment of 4.81 crore equity shares on a preferential basis to nine of its aircraft lessors to clear outstanding dues of Rs 231 crore. The airline's board has also approved the allotment of 3.41 crore shares equity shares and 13.14 crore warrants at an issue price of Rs 29.84 each to promoter Ajay Singh's group Spice Healthcare.

The carrier is facing multiple headwinds such as insolvency pleas and court cases from shareholders, including ex-promoter Kalanithi Maran who has to be paid Rs 380 crore as per a Supreme Court ruling.

On technical setup, the counter was last seen trading higher than the 5-day, 10-, 20-, 30-, 50-, 100-, 150-, 200-day simple moving averages (SMAs). The counter's 14-day relative strength index (RSI) came at 79.12. A level below 30 is defined as oversold while a value above 70 is considered overbought. The company's stock has a negative price-to-equity (P/E) ratio of 3.91 against a negative price-to-book (P/B) value of 0.34.

"SpiceJet is bullish but also overbought on the daily charts with next resistance at Rs 42.45. A daily close below support of Rs 35 could lead to target of Rs 30.8 in the near term," said Pavitraa Shetty from Tips2trades.

"At the current juncture, the counter is trading above all major daily exponential averages, which is a positive sign. As we advance, Rs 45 would be stiff resistance and support could be seen around Rs 33," said Jigar S Patel, Senior Manager - Technical Research Analyst at Anand Rathi Shares and Stock Brokers.

"The share price is strong on technical setup in daily chart. The short-term moving averages are trading below the prices supporting an up move in the counter. It may touch Rs 45 level in near term," market expert Ravi Singh.

"The stock is still looking bullish. One can expect targets between Rs 43 and Rs 65 in a very short period. Maintain a stop loss at Rs 27. A 5 to 10 per cent pullback is normal in such a movement. So, keep a view of averaging too," said VLA Ambala, research analyst at Stock Market Today.

The scrip has an analyst target price of Rs 32, Trendlyne data showed, suggesting a potential downside of 17 per cent. It has a one-year beta of 0.68, indicating low volatility on the counter.

The private airline reported a net profit of Rs 205 crore for the quarter ending June 2023 (Q1 FY24) as compared to a loss of Rs 789 crore in Q1 FY23 due to a strong air travel demand.

In the March 2023 quarter (Q4 FY23), the airline posted a net profit of 17 crore against a loss of Rs 458 crore in Q4 FY22. In FY23, SpiceJet said it lowered its losses to Rs 1,503 crore against to Rs 1,725 crore in FY22. For the same comparative period, it reported operating revenue of Rs 8,869 crore in FY23 as against Rs 6,557 crore in FY22.

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