SPICEJET MULTIBAGGER POTENTIAL STOCK D15M10Y2015

Spicejet is a low cost airline. It was originally founded by Ajay Singh and Bhupendra Kansagra in 2005. A south based group took over the airlines in 2010. After the company ran into rough weathers in 2014, it was once again acquired by Ajay Singh.
For more info check, http://www.spicejet.com/

NUMBERS - THE LATEST        
Market cap: 2354 crores            CMP on Day25 June2015: Rs 38.50             BV: Negative
Revenue FY14: 6304 cr               Net profit FY14: (1000 cr)loss                    FV: 10           

POSITIVES - TURNAROUND FACTS       
1. From a net loss of 124 crores in Q1FY14 the company made a net profit of 71 CR in Q1FY15. In all probability Q2 profit should surpass 100 cr.  
2. Lower crude oil prices has played a wonderful role in this turnaround. In operating expenses, cost of aircraft fuel was 773 crores in Q1FY14 and it is 358 crores in Q1FY15. In all probability the cost of global crude prices will remain subdued for some time. Spicejet is a direct beneficiary.  
3. Since last 5 months, load factor for Spicejet has been in excess of 90% which is a fantastic indication of the customer confidence   
4. From the time of ownership change, debt has come down from 2200 crores to 1100 crores.

INTERESTING INFO - SPICEJET IN THE RIGHT DIRECTION      
1. SpiceJet plans direct flights to Dubai from Amritsar and Kozhikode(Calicut), starting November 15, 2015 for an introductory fare of 4999 rs.  
2. The airlines adds 6 new aircrafts and offers 291 daily flights, 10 new sectors, 30 increased frequencies and 22 via connections
3. Spicejet become the first airline to perform a civilian night landing at Port Blair in Andaman
4. The airlines announced its first red-eye flights(late night flights) on the Delhi - Bangalore route commencing from November 2015.        

NEGATIVES - POSSIBLE RISKS  
1. The turn around is still a work-in-progress. Though it is heading in the right direction with substantial tail winds from the environment, there are always unknown risks which could surface.  
2. Airlines in general are risky business. Even from a global perspective they have been wealth destroyers. So investors cannot afford to be complacent. You need to be vigilant and book profit at the right time. Probably even well before time.

MY TAKE
Spicejet is an amazing turn-around. It is still work-in-progress.  

This company had come to a stand still in December 2014. It had hit a rock bottom in terms of operations and finances. When Ajay Singh acquired the company in Feb 2015, the company was in deep mess.

Full credit to the business acumen of Ajay Singh, and his experience in the aviation business, which is not only complex, but also dependent on multiple external factors. In 6 months he has steered this airlines in the right direction.   

Today this company is available at a market cap of around 2000 crores.  

Indigo the leader in low cost airlines is coming with its IPO this month end. With a market share of around 35%, it could have a valuation of anywhere between 20,000 - 25,000 crores.  

Spicejet has a market share of around 15%. Now how much will the market value Spicejet at ?

4000, 6000, 8000 crores ? It is anybody's guess :-)           

A strong potential multibagger!!    


Disclosure: I own shares in Spicejet.


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Important Note: Potential multibaggers are those stocks which have potential to give 100 - 500% profits. Obviously such returns take time. Probably 3 - 4 years or more. Short term volatality is the reality of the stock market and that will always happen. Short term movements(upside and downside) are impossible to predict. Only invest funds that you will not need for the next 3 - 4 years. As long as you buy a stock for the right reason and are convinced about the future prospects of the company, there is no need to worry if the share price goes down and stays down for a period of time after you buy; provided you have followed the cardinal stock market mantra BUY LOW.


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