This Rakesh Jhunjhunwala stock plunges over 4%, but set to rise by 80 per cent - Should you buy?

The benchmark indices were trading slightly on cautious note on Dalal Street on Thursday. Despite that majority of stocks held by big bull Rakesh Jhunjhunwala saw uptick in their market price. However, this was not the case for the ace investor’s newly added stock - SpiceJet. The share price of this airline plunged by over 4% with an intraday low of Rs 80.80 per piece on Sensex. However, the airline was trading at Rs 82 per piece down by 2.79% on the index at around 1150 hours. Jhunjhunwala in Q2FY19, found love for SpiceJet and bought about 1.25% stake in the airline with 7,500,000 shares aggregating up to Rs 63.3 crore. Gains from SpiceJet have been single-digit since last year. 

Interestingly, SpiceJet is seen as a money making stock ahead, with potential of rising by a whopping 80%. 

Paarth Gala analysts at Prabhudas Lilladher said, “We continue to remain positive on SJET as we believe it is well placed to benefit from the booming Indian aviation market given its strong presence in regional markets, large order book of fuel efficient aircrafts and long terms maintenance contract in place. We expect a CAGR of 21%/11% in Revenue/EBITDAR respectively over the next three years and value the stock at 8x FY21E adj. EV/EBITDAR. Maintain BUY with a TP of Rs107.”

Gagan Dixit and Rachael Alva analysts at Elara Capital said, “We lower FY20E EPS by 8% and FY21E EPS by 11% on a lower PLF at 88% (from 92%) for FY20E and at 87% (from 89%) for FY21E on sizeable capacity addition, offset by lower fuel CASK at INR1.3 per seat-km from INR 1.4 per seat-km. We lower our TP to INR 144 from INR 158 on 8.0x (unchanged) FY21E EV/EBITDAR. We reiterate Buy on improving fuel efficiency, falling non-fuel cost with new fleet addition, and short-haul international market opportunity with Boeing-737-8Max.”

Apart from this, Santosh Hiredesai and Chalasani Teja analysts at SBICap Securities said, “With the domestic market growth moderating from the earlier highs there seems to be some pricing discipline coming back into the system. This, coupled with efforts to reduce cost should drive improvement in profitability, going ahead. We maintain BUY with a TP of Rs109/share valuing the company at 8.5x FY20e EV/EBITDAR.”

Hence, if you have invested just like Jhunjhunwala, then you are well placed to become further rich ahead. As for new investors, considering SpiceJet market price has corrected, one can look to buy this stock to avail the expected gains. 

(The buy call is based on expert advice and is subjected to market risk)