Indian Travel Industry In 'Top Gear', Says Jefferies, Reiterates IndiGo As Top Pick

Indian travel industry is still in top gear with aviation and hotels expected to post heathy growth rates, led by improving income and evolving lifestyle, according to Jefferies.

InterGlobe Aviation Ltd. continues to be the top pick for the brokerage, followed by Indian Hotels Co. and AMR Airports Ltd. Travel demand in India has remained healthy, even post the growth normalisation seen in many consumer segments post Covid, Jefferies said in a note on Nov. 8, 2024.

Tourism growth is driven by a combination of factors, including income and evolving lifestyle, business travel, desire to travel more, and impact of social media, it said. "Industry pricing across segments remains elevated without hurting growth."

Average room rates of hotels as well as airfares have surged significantly post-Covid, yet demand remains robust, suggesting a structural demand upturn in the travel sector, Jefferies noted.

India's aviation traffic is expected to clock 11-12% CAGR over the medium term, driven by faster growth in the international segment, Jefferies said. In hotels, the industry revenue per available room is expected to clock 7-8% CAGR going ahead after double-digit growth seen in the past two to three years, it said.

• Jefferies maintained a 'buy' rating with a target price of Rs 5,260 per share, implying an upside of 21%.

• IndiGo is a unique, strong franchise with a dominant market share in domestic air travel.

• Recent stock underperformance follows a sharp miss in second quarter results, on higher costs.

• IndiGo's story remains intact, with a ramp-up in its capacity amid constraints for most peers.

• An inferior cost curve for peers means an advantage for IndiGo.

• The brokerage maintained 'buy' with a price target of Rs 110, implying a 42% upside from the previous close.

• Airports are an attractive monopolistic business, and the company is positioned to benefit from the underpenetrated Indian aviation story.

• It believes GMR is set to grow at a fast clip of 30% Ebitda CAGR over fiscal 2024-27.

• Recent simplification of the corporate structure, consolidation of stakes in airport special purpose vehicles and improvement in leverage ratios are other upticks.

• Jefferies maintained a 'buy' with a price target of Rs 1,000 per share, implying a 17% upside.

• Company unfazed by slowdown evident in other consumer segments.

• The company's track record of delivering previous targets gives us confidence on deliverability of new goals.

• With its industry-leading hotel pipeline, the company will benefit from industry tailwinds.

• Focus on diversification of topline will help hedge against the slowdown.

• Brokerage expects double-digit Ebitda/profit CAGR for the firm over the medium term.