The shares of this leading airline firm gained around 3.2 percent this week, an all-time high price of ₹3,339 apiece after the brokerage raised the target price for an upside of 29%.
InterGlobe Aviation Limited is engaged in aviation management, hotel development, and management services. The company also works in passenger and cargo management and also offers travel distribution services, such as itineraries and domestic. As of FY23, the company has a 55 percent market share in domestic passenger airlines.
On Tuesday, at 3:00 p.m., the company’s shares were trading at ₹3,234 a share, down 0.43 percent from the previous close price, the company has a market capitalization of ₹1,24,833 crores.
During Q3 FY23 to Q3 FY24, the company experienced a significant 30% increase in revenue, soaring from ₹14,933 crores to ₹19,452 crores. Concurrently, net profit surged by an impressive 111%, climbing from ₹1,418 crore to ₹2,998 crore.
As of December 2023, the company’s fleet consisted of 358 aircraft, with 26 owned or under finance lease, 319 under operating lease, and 13 under damp lease. Additionally, the Available Seat Kilometres (ASK) witnessed a remarkable 27% growth, rising from 28,766 in Q3 FY23 to 36,464 in Q3 FY24.
Having a positive outlook for the company, Kotak Securities has raised the target price to ₹4,200, indicating an upside of 29 percent as compared to the current price levels of ₹3,252 per share.
The brokerage firm predicts that while IndiGo’s competitors will have limited, capacity expansion, IndiGo itself will increase its capacity at a rate comparable to or even faster than the market during this timeframe. It emphasised that both Boeing and Airbus are experiencing record backlogs, with approximately 11-12 years’ worth of annual deliveries.
Kotak Securities projects that the country’s aircraft capacities will increase by 11 percent during FY24-30, with seat capacities growing at a slightly higher compound annual growth rate (CAGR). However, the brokerage has factored in the risk of Boeing exposure, which constitutes more than 25 percent of the backlog of Indian carriers, possibly facing deferrals beyond its anticipated timeline.
“IndiGo has provided capacity guidance for 2030, indicating an 11-12 percent CAGR in the fleet count and a slightly higher CAGR for ASK (available seat kilometers). The airline is well-positioned to utilize this capacity across both domestic and international routes. Pricing, which is a key variable for IndiGo, is unlikely to be significantly impacted by competition,” noted Kotak.
Furthermore, Kotak highlighted that Indigo holds approximately 60 percent of the country’s order backlog, having placed orders well ahead of other market players, and, importantly, has no exposure to Boeing.
In addition, Kotak suggested that the expansion of new airports could drive robust demand growth, especially considering the existing base that Indian carriers have yet to fully tap into.
Written by Omkar Chitnis
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