Geojit Is Bullish On This Large Cap Airlines Stock, Recommends Buy For Rs 2,281 Target Price

Geojit, a leading brokerage firm, in its recent report on InterGlobe Aviation Ltd. has given a buy call to the stock of the company for a target price of Rs 2,281 apiece. According to the brokerage's estimated target price, the stock has the potential to gain 13% in 12 months if the stock is bought at the current market price. InterGlobal Aviation Ltd (Indigo) is one of the most efficient low-cost carriers (LCC) with a market share of 54% in the Indian aviation sector.

Stock outlook

The current market price of InterGlobe Aviation Ltd. stock is Rs 2,029.40 apiece. The stock hit the 52-week low at Rs 1,511.75 apiece on 20 June 2022, and the 52 week high at Rs 2,380 apiece on 18 November 2021. The stock is trading Rs 2 above its intraday trade low. 

Returns on investments in the past 5 years

It has given 2.77% in the past 1 week, whereas in the past 1 and 3 months it has given 4.36% and 10.98%, respectively. Whereas in the past 1 year, it has given a roughly 4.395 positive return. In the past 3 years, it has given 20.05% of positive return. In terms of returns over the past 5 years, the stock performed well and has given a 61.68% of positive return. 

Strong revenue growth

Q1FY23 Revenue grew by 327% YoY, albeit at lower base, was better than expected, supported by 80% load factor and healthy ticket prices. Load factors were driven by strong rebound in leisure & corporate travel. Further, international travel has normalised and has reached its precovid levels, which was growing at faster rate. Capacity addition continue to remain strong, with ASK touching almost similar to pre-covid levels. Indigo has returned 6 older A320ceo aircrafts and added 3 new A320neo & 9 A321 neo, during the quarter. Currently, total aircrafts under operations are 283. Going forward, we expect passenger traffic to gather further pace led by revival in corporate, festive & holiday travel and strong international traffic. Q2FY23 is seasonally quarter, but H2FY23 growth expected to be strong.

Fuel cost to moderates

Despite strong top-line growth, Indigo reported a loss of Rs.1065cr. Key reasons are higher fuel cost and adverse movement in currency. Fuel cost to sales was at 47% vs 40% YoY & QoQ. While Rs. 1,400cr of forex loss also added to woes. Going ahead, we expect profitability to come in near term given moderation in ATF prices, stable ticket price and strong load factors. "We don't expect any further adverse moment in forex similar to Q1FY23. Further, replacement of older aircrafts is likely to improve operating efficiency in the medium term," the brokerage said.

Outlook and Valuation

The brokerage said, "We continue to maintain positive view on Indigo considering its market leadership position, ability leverage to its network, cost-efficient fleet and healthy cash position. Domestic & international traffic is back to pre covid levels. While moderation in fuel prices and stable ticket prices will improve earnings going ahead. We value Indigo at P/E of 17x on FY24E, (6.1x EV/EBITDA) and maintain BUY with a target price of Rs.2,281."

Disclaimer

The stock has been picked from the brokerage report of Geojit. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.