IndiGo slips in the red in early trade despite strong Q4 show, upbeat brokerage views

Morgan Stanley has an ‘overweight’ rating on shares of InterGlobe Aviation with a hike in target price to Rs 3,126. Even JP Morgan has an ‘overweight’ call on the airline’s stock with a hike in target price to Rs 2,700.

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Shares of InterGlobe Aviation (IndiGo) opened around 2 percent higher on May 19 as the airline reported a strong set of quarterly numbers followed by an upbeat brokerage commentary.

However, given the recent rally, the scrip failed to hold on to early gains.

At 09:45 am, the airline company’s stock was quoting at Rs 2,234, down more than 1%. In the past month, the scrip has gained 15 percent and is up 36 percent in the past year.

Indigo’s revenue from operations grew 76.5 percent to Rs 14,161 crore from Rs 8,020 crore in the same quarter last fiscal. The carrier’s EBITDAR (earnings before interest, tax, depreciation, amortisation and rent) jumped to Rs 2,966.5 crore as against Rs 171.8 crore YoY, while its margin increased manifold to 20.9 percent as compared with 2.1 percent a year ago. Net profit rose to Rs 919.20 crore as compared to last year’s loss of Rs 1,681.80 crore.

Morgan Stanley has an ‘overweight’ rating on the stock with a hike in target price to Rs 3,126. The brokerage firm believes market share and margin are key stock drivers for the airline company. It also said that IndiGo’s stock valuation is below the median level.

JP Morgan also has an ‘overweight’ call on the company’s stock with a hike in target price to Rs 2,700. The foreign brokerage firm said that Q4 earnings are in line with its estimates. It also pointed out that the airline company has maintained its guidance on more than 15 percent growth in Available Seat Kilometers in FY24.

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It expects better than usual spread in Q1 of FY24 led by some yield hardening against the fall in crude. JP Morgan has revised its EBITDA estimate for FY24 and FY25 by 12 percent and 7 percent respectively to reflect better spread potential.

IndiGo’s yields, a metric for profitability, rose 10.2 percent YoY to Rs 4.85 per kilometre.

Besides, Indigo intends to double its fleet by 500 aircraft by FY30. Further, replacement of CEOs with NEOs shall lift yields. This has prompted Nuvama Institutional Equities to maintain a ‘buy’ rating on shares of IndiGo with an 8 percent increase in target price to Rs 2,703.

“A likely duopolistic industry structure dominated by Indigo and Air-India bodes well,” said the domestic brokerage firm.

Motilal Oswal Financial Services has even increased its revenue estimates by 12 percent and 17 percent for FY24 and FY25 because of the strong pricing trend being seen in ticketing revenue. It has highlighted that the stock continues to trade above its pre-covid levels which has resulted in the brokerage firm reiterating its ‘neutral’ recommendation on the stock with a target price of Rs 2,135 at 7.5 times FY25 EV/EBIDTAR.