IndiGo's Demand Momentum, Competitive Strategy Drive Positive Analyst Views
IndiGo airline operator InterGlobe Aviation Ltd. received positive views from analysts on earnings projection, given demand visibility, domestic position, and competitive strategy.
Demand momentum for air travel in India remains robust and IndiGo, with its large fleet and orderbook, is well positioned to benefit from this air traffic demand growth, analysts at Citi said in a note.
Induction of wide-body aircraft from Airbus over the next few years will enable the budget airline to offer long haul international routes as well.
During Wednesday's analyst meet, IndiGo executives guided for 12-13% growth in carrying capacity as well as passengers next fiscal. The management reiterated its goal of surpassing 600 aircraft by 2030.
In January, the management had anticipated a slight year-over-year decline in unit revenue. However, strong demand in the fourth quarter, driven by the Maha Kumbh event and a prolonged wedding season, has actually led to an improvement in yield momentum, Citi said.
BofA raised IndiGo's three-year earnings estimates with near-term pricing power surprising to the upside on strong demand. "We lift our FY25-27 operating profit estimates by an average of +7% to factor IndiGo's revised 4Q unit revenue outlook and FY26 capacity growth guide," the note said.
The analysts are also confident on the FY30 growth strategy.
According to Goldman Sachs, the management sees yields in March quarter performing significantly better than initially expected, with a notable improvement over the earlier guidance of a slight decline. In fact, the brokerage's proprietary yield tracker indicates a 4-5% year-over-year increase in domestic fares so far during the period.
IndiGo Share Price Target
BofA: Reiterates 'buy' with a target price of Rs 5,600.
Goldman Sachs: Maintains 'buy' with a target price of Rs 5,050.
Citi: Maintains 'buy' with a target price of Rs 5,200.
InterGlobe Aviation share price closed 3.6% higher at Rs 4,806.25 apiece on Wednesday, compared to a 0.32% gain on the benchmark NSE Nifty 50.
The stock has risen 55% in the last 12 months and 9% on a year-to-date basis.
Seventeen out of the 22 analysts tracking IndiGo have a 'buy' rating on the stock, three recommend a 'hold' and two suggest a 'sell', according to Bloomberg data. The average of 12-month analyst price target implies a potential upside of 3.7%.
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