Buy SpiceJet with a target at Rs 128: Prabhudas Lilladher

Prabhudas Lilladher (PL) is positive on SpiceJet. The brokerage has recommended buy on the aviation stocks with a target price of Rs 128, based on 12.5x FY17e EPS.

With aviation companies performing better on parameters related to both revenues and profitability, the brokerage believes that Spicejet is in a strong position to provide the best profitability growth in the sector. It offers cheaper valuations as compared to the industry leader Interglobe Aviation, the brokerage said.

“With its strategy to increase non-passenger related revenues, SJ is focusing on cargo services and other ancillary services like food and beverage and this foray is expected to result in increasing the share of cargo services revenues from 2.9 per cent of sales in FY15 to 5.3 per cent in FY18E.We expect a total revenue CAGR of 11.3 per cent over FY15-18E and an EBITDAR CAGR of 79.3 per cent over the same period,” PL said in a note.