IndiGo operator InterGlobe Aviation shares rallied more than 3 percent intraday to hit a record high of Rs 1,716 on May 28 after March quarter earnings beat analyst estimates.
The stock has surged 51 percent in the last three months especially after gaining some market share from Jet Airways that suspended its operations due to cash crunch. It was quoting at Rs 1,677.05, up Rs 14.05, or 0.84 percent on the BSE, at 1024 hours IST.
The low-cost carrier operator showed a massive 401.2 percent year-on-year growth in March quarter profit at Rs 589.6 crore, driven by Jet fiasco and stable fuel prices compared to year-ago.
Revenue during the quarter grew 35.9 percent year-on-year to Rs 7,883.3 crore and Its earnings before interest, tax, depreciation, amortisation and rent (EBITDAR) shot up 93.7 percent to Rs 2,192.6 crore with margin expansion of 830 bps YoY.
Numbers were ahead of analyst estimates. Profit was expected at Rs 470 crore on revenue of Rs 7,700 crore and EBITDAR was estimated at Rs 2,114 crore with margin at 26.7 percent for the quarter, according to a CNBC-TV18 poll estimates.
Brokerages turned mixed in their opinion as some feel the market share has peaked while rest believe yields are going to be strong going ahead.
Brokerage: Prabhudas Lilladher | Rating: Buy | Target: Rs 1,948 | Return: 17 percent
We upgraded FY20 & FY21 EPS by 18 percent and 20 percent, respectively, given the 1) strong yield environment following Jet suspending operations 2) industry-leading capacity growth of 27 percent over FY19-21 and 3) focus on expanding international footprint and optimizing network shall enable unit revenues (RASK) to grow 5 percent over FY19-21.
We continue to remain positive on IndiGo as we believe it stands to gain the most from the capacity vacuum created in the industry due to Jet suspending operation and grounding of Boeing 737 Max over safety concerns. With around 50 percent domestic market share and a strong management team in place, IndiGo is well placed to leverage its large domestic network to fuel its international growth.
Given its strong balance sheet, high operating efficiency and industry-leading cost structure, we expect IndiGo to continue outperforming industry growth with ASK and revenue growing at a CAGR of 27 percent and 34 percent, respectively, over FY19-21. We value the stock at 8.8x adj. EV/EBITDAR. Maintain buy with a target price of Rs 1,948. Any abnormal increase in crude oil prices and irrational yield environment are key risks to our call.
Brokerage: Citi | Rating: Sell | Target: Rs 1,300 | Return: 21 percent
We have sell call on the stock but have raised price target to Rs 1,300 from Rs 1,000 apiece as we increased yield assumptions by 4 percent.
At current prices, market share gain positives are baked in and we believe that market share has peaked.
While seasonally strong Q1 could see better yields, fares are plateauing. We increase EBITDAR estimates by 5-13 percent over FY20-21.
Brokerage: Motilal Oswal | Rating: Neutral | Target: Rs 1,460 | Return: 12 percent
IndiGo is expected to grow its capacity by 30 percent in Q1FY20 and FY20. Management guided that the impact of the yield increase due to grounding of Jet Airways was seen primarily in April 2019. The impact had come down in May'19 and is likely to completely nullify in June 2019 due to ongoing capacity addition.
Our estimates are highly sensitive to (a) ticket yield, (b) PLF and (c) crude price assumption; material change to any of these will impact our estimates. Thus, we remain cautious on the stock (trades at 26.5x FY20E EPS of INR62.7 and 9.9x FY20E adj. EV/EBITDAR). We value IndiGo at 14x FY21E EPS to arrive at a target price of Rs 1,460. Maintain Neutral.
Brokerage: Credit Suisse | Rating: Outperform | Target: Rs 1,800 | Return: 8 percent
We have an outperform rating on the stock with a target price at Rs 1,800 apiece, though numbers were marginally below our estimates driven by lower ASKs.
Yields along metro and non-metro routes remained strong. Company guided for 30 percent YoY growth in ASKMs in Q1 & for FY20.
Yields remained high in April & may be driving sizable benefit.
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