Your Stock Queries
4/5/2012 9:00 PM Thursday
I purchased shares of SpiceJet a year ago. Please guide me as to whether I should exit from this stock or whether I should accrue more shares.
-D K Kumar, Via Email
SpiceJet, BSE Code 500285, with a face value of Rs 10, is currently trading at Rs 22.60. Its 52-week high/low are Rs 47 and Rs 15 respectively.
SpiceJet is a dedicated low-cost domestic carrier, which has rapidly gained market share and is now among the top five domestic carriers. It began its services in May 2005. Currently, it has a fleet of 30 B-737s and five Q-400s, and an extensive network between 22 destinations in India and two destinations in South East Asia. SpiceJet is India’s second largest low-cost carrier. Its business model exploits the changing preferences of price-sensitive Indian flyers. However, intense competition on the back of higher supply growth and high fuel costs weighs on the overall profitability in the sector, including that of SpiceJet.
On the financial front, the company reported muted results for 9M FY12. The topline witnessed a growth of 33 per cent on a YoY basis for 9M FY12 and stands at Rs 2888 crore as against Rs 2175 crore for 9M FY12. The bottomline, however, witnessed de-growth and stands at a loss of Rs 351 crore for 9M FY12 as against a profit of Rs 160 crore for 9M FY11. If we look at the company on a quarterly basis, we find that despite Q3 being the seasonally strongest quarter, SpiceJet posted yet another quarter of loss (fourth consecutive quarter). Though, SpiceJet reported sharp sequential improvement, this was not enough for a breakeven. Supply growth is expected to be more moderate going forward, largely on account of Kingfisher’s capacity cuts. However, traffic growth is also expected to moderate due to the slowing economy. On the valuation fronts, the stock trades at an EV/EBITDA of 6.13x. We suggest that you exit the stock, as the aviation sector is not going through favourable times.
I am holding 1000 shares of Hindalco Industries purchased at Rs 155 per share. What should my next step be with respect to these?
-V T Abraham, Kerala
Hindalco Industries, BSE/NSE Code 500440/HINDALCO, with a face value of Re 1, is currently trading at Rs 124, which is at a 20 per cent premium to your acquisition cost. Its 52-week high/low stand at Rs 225 and Rs 111 respectively.
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