Post disappointing Q4 results , Jet Airways and SpiceJet stocks tanked on Monday. However, Sharan Lillaney, Angel Broking is bullish on the two aviation stocks with a long-term perspective of 12-18 months.
"After results, passenger traffic will not take off as expected, so you can expect at least 10 percent decline in earnings per share (EPS) estimates going ahead. Given the long-term perspective for the industry, we have not reduced our target price for either of the companies," he says in an interview to CNBC-TV18
Lillaney expects SpiceJet to post 20 percent Y-o-Y growth in FY14.
Below is the verbatim transcript of Sharan Lillaney's interview on CNBC-TV18
Q: What is the call on Jet Airways numbers after the decline in the stock today?
A: The numbers for both the airlines were quite disappointing given higher depreciation in the rupee and higher expenses, forex losses. Numbers were well below our expectations, but given the structural change in the company going ahead with the partnership with Etihad, they can see significant improvement in their international performance.
This quarter also around 60 percent of the total operations had load factor of around 80-85 percent and their domestic business that contributed around 40 percent of the total operations were a bit lower to around 74-75 percent. Going ahead, structurally with the deal that has happened there are lot more positives to come ahead, but in the short-term if passenger traffic does not take off as expected there could be a short-term problem going ahead with the industry itself.
Q: Speaking of the short-term, have you scaled down or tweaked your FY14 EPS estimates for Jet or perhaps even SpiceJet after the numbers?
A: After these results, passenger traffic will not take off as expected, so you can expect at least 10 percent decline in our EPS estimates going ahead. Given the long-term positive for the industry, we have not reduced our target price for either of the companies. They still remain positive on the long-term so at least 12-18 months on both these companies.
Q: Particularly for FY14, could you tell us your EPS estimates for Jet as well as SpiceJet? If it comes down, could we work with a 10 percent reduction in both of them?
A: Jet Airways is not under our active coverage, but SpiceJet we have a concall with the management today and post that only we will come out with our numbers. We still remain positive on SpiceJet given its light balance sheet that is also at reasonable levels and the 20 percent Y-o-Y growth which they are achieving we expect a very positive year going ahead.
