SpiceJet’s (SJ) 1QFY17 APAT at Rs 1.5bn (+2% QoQ), was above our estimates of Rs 1.2bn. Passenger revenues were in line (+5% QoQ, passengers carried +4%, yield +2%) with our estimates. Ancillary revenue was flattish QoQ (+64% YoY) to Rs 1.6bn owing to the back ended introduction of various services. EBITDA increased 112% QoQ (+53% YoY). The sharp rise was based on one time maintenance expenses last quarter.

While the management is upbeat about the ongoing turnaround strategy, possible rise in crude oil prices are worrying. SJ is likely to continue focusing on ancillary revenue and cost rationalisation. They maintain our NEUTRAL rating, with a TP of Rs 70 based on 6x FY18E EV/EBITDAR and expected dilution with 189mn warrants. However, clear upside is expected in case no dilution plays out (decision pending).