Credit Suisse Sees 58% Upside In This Airline From Current Levels

As per Credit Suisse's latest report on Interglobe Aviation (IndiGo) suggests that the risk-reward on Interglobe Aviation, the parent company of IndiGo Airlines, is much better now that the economy and air traffic is picking up. Lower crude oil prices and low competition will also support the company, it said.

The brokerage house has a rating of "outperform" on the stock and increased its price target from Rs 1,500 to Rs 2,100, an upside of 57.9 percent from IndiGo's closing price of Rs 1,329.65 on Friday (16 October). It expects EPS (Earnings Per Share) from the company for FY23 at Rs 126.

The airline traffic has improved to 45 percent of the last year's level, with IndiGo's traffic at 55 percent, given its market share in the Indian aviation space.

Further, for the September ended quarter, Credit Suisse's sees InterGlobe Aviation's losses to be less than Rs 1,000 crore amid expectations of Rs 2,000 crore losses.

Q1

For the June ended quarter, InterGlobe Aviation had posted a net loss at Rs 2,844.3 crore, in comparison with Rs 1,203.1 crore net profit in the same period last year.

Revenue from operations plunged a massive 91.9 percent during the quarter as the government had imposed restrictions on air travel for most of the period under review.

The low-cost carrier said it had a total cash balance of Rs 18,449.8 crore comprising Rs 7,527.6 crore of free cash and Rs 10,922.2 crore of restricted cash. Management of cash is of vital importance for the company until airlines reach pre-COVID operation levels.

Outlook on Aviation Industry

Domestic passenger services restarted on 25 March after complete shutdown for two whole months.

The aviation sector was among the worst-hit sectors by the COVID-19 pandemic but it gradually moving towards normalcy. The revenue of airlines slipped by 85.7 percent between April to June 2020, overall.

A report suggests that domestic air traffic could reach pre-COVID level by the end of 2020 as the government is expected to allow 75 percent of flight operations soon.