SpiceJet shares: InCred maintains 'Hold' call, lowers target price

SpiceJet reported a net profit after tax (PAT) of Rs 340 crore for Q4 FY25, aided by a one-off income of Rs 220 crore arising from lease liability restructuring. Adjusting for this, the airline's PAT stood at Rs 130 crore -- a significant turnaround from the losses of Rs 420 crore and Rs 50 crore reported in Q4 FY24 and Q3 FY25, respectively.

According to InCred Equities, the notable improvement was driven primarily by a 23 per cent year-on-year (YoY) and 17 per cent quarter-on-quarter (QoQ) rise in revenue per available seat kilometre (RASK), boosted by seasonal travel demand from the Kumbh Mela. Passenger load factor (PLF), however, dropped by 649 basis points (bps) YoY but saw a modest 109 bps sequential uptick.

The brokerage said the operating profit before tax per ASK (PBT/ASK) came in at -Rs 0.4, reflecting a QoQ improvement of Rs 0.8 and a YoY gain of Rs 1.2. Gross margin per ASK improved by Rs 0.73 QoQ and Rs 1.05 YoY. Cost per ASK excluding fuel (CASK ex-fuel) remained stable at Rs 4.1, both on a YoY and QoQ basis.

InCred noted that SpiceJet's financial position also showed some recovery post its Rs 3,000 crore qualified institutional placement (QIP) in September 2024 at Rs 61.6 per share. Of the proceeds, Rs 2,700 crore has been utilised. This reduced the airline's negative net worth from Rs 5,220 crore to Rs 1,940 crore.

The airline settled a Rs 950 crore lease restructuring with a lessor, with Rs 430 crore to be paid via share issuance. This transaction led to a Rs 520 crore gain for the company.

Despite the better-than-expected performance in Q4 FY25, InCred Equities has cut its FY26 EBITDAR estimates by 43 per cent due to lower ASK growth expectations. It has introduced FY27 projections and rolled forward its valuation to March 2026.

InCred now values SpiceJet at 8x FY27 EV/EBITDAR -- in line with historical averages -- and maintains a 'HOLD' rating, with a revised target price of Rs 47 (down from Rs 57).

The brokerage expects the airline's entire fleet to be operational by FY27, projecting that the RASK-CASK gap will improve from -Rs 0.4 in Q4FY25 to Rs 0.14 by FY27. Upside risks include a sharp rise in domestic air traffic, while downside risks stem from pressure on profit margins.

Meanwhile, SpiceJet shares erased entire early gains and settled 2.19 per cent lower at Rs 42.85 on Monday.