The shares of this leading airline firm gained traction this week after the brokerage raised the target price for an upside of 34%.
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.
From Q4 FY23 to Q4 FY24, the company saw a notable 26% rise in revenue, jumping from ₹14,161 crores to ₹17,825 crores. Additionally, net profit surged impressively by 107%, increasing from ₹916 crore to ₹1,894 crore during the same period.
InterGlobe Aviation Limited shares have surged 41% over the past six months and 60% over the past 12 months.
UBS has raised the target price to ₹5,300 from ₹4,000 per share, indicating an upside of 25 percent as compared to the current price levels of ₹4,250 per share. CNBC TV 18 reported.
According to UBS’s quantitative regression model, Indian air travel is projected to grow at a double-digit rate. The brokerage firm forecasts that IndiGo will continue to expand its market share in international travel, supported by the introduction of aircraft models like A321 XLRs and A350s over the medium to long term.
UBS anticipates that IndiGo will achieve a 13% compound annual growth rate (CAGR) in EBITDA from FY24 to FY27, with potential upside risks.
“Long-term macroeconomic prospects, coupled with favorable demand-supply dynamics, suggest sustained robustness in India’s air travel demand,” the brokerage noted.
UBS also highlighted that IndiGo’s profitability and yields in Q1 FY25 might be affected by increased near-term capacity from Air India and Vistara. Furthermore, Q2 is expected to be weaker due to seasonal factors.
IndiGo is currently valued at 11 times its one-year forward EV/Ebitda, aligning with its five-year and ten-year historical averages. This valuation implies a price-to-earnings ratio of 23 times for FY26, positioning IndiGo as comparatively less expensive than other Indian tourism-focused stocks, according to UBS.
IndiGo is well-positioned for sustained profitability despite near-term cost inflation, supported by its market dominance and strong pricing power.
In the medium term, factors such as declining crude oil prices, an increasing share of international and tier-2 and tier-3 routes, the adoption of more fuel-efficient aircraft, and a decrease in grounded aircraft are expected to further boost margins, according to the brokerage.
While Kotak Institutional Equities gave an upside of 34% for a target price of ₹5,700 apiece.
Kotak stated that as passenger’s ability to pay decreases and airline losses accumulate, airfares are expected to gradually rise. The willingness of passengers to pay higher fares may be tested in the short term, which could affect airlines’ near-term load factors and pricing strategies.
Additionally, Kotak noted that IndiGo is presently the sole profitable airline and is well-positioned to capitalize on potential increases in airfares over time.
Kotak Institutional Equities stated that air passengers predominantly consist of the wealthiest 5% of the population. This group represents a small subset that is less restricted in terms of spending. Broker anticipates earnings per share of ₹ 253.4 in FY25E and ₹ 254 in FY26E.
Written by Omkar Chitnis
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