Interglobe Aviation skids 2% on Investec's 'Sell' downgrade, predicts 15% slide

The downgrade by Investec comes on the back of "out-of-sync valuation" which ignores margin risk

Shares of Interglobe Aviation declined 2 percent to Rs 4,784 apiece on September 20 after Investec downgraded the low-cost carrier to 'sell' from 'hold' and shared a target price of Rs 4,050, implying a further slide of 15 percent from current levels.

The downgrade by Investec comes on the back of "out-of-sync valuation" that ignores margin risk. Moreover, the brokerage firm feels that the airline operator exhibits unexciting earnings growth over the next three years and premium valuations.

While the large order book offers growth visibility, it does not guarantee earnings growth because of its higher sensitivity to margins, added Investec.

ALSO READ: Neutral InterGlobe Aviation; target of Rs 4970: Motilal Oswal

The market share of India's largest airline, IndiGo, grew in August and July after falling 80 basis points in June. The airline had lost 160 basis points in January 2024's market share, but since then it has been on an upward trend.The airline's market share now stands at 62.4 percent, with the low-cost carrier flying 81.90 lakh passengers in August.

Recently, Motilal Oswal analysts shared a 'neutral' rating on Interglobe Aviation with a target price of Rs 4,970 per share.

"With an order for nearly 985 aircraft, including that of Airbus A350-900s, the airline aims to enhance efficiency and meet the rising demand by CY30. IndiGo aims to solidify its domestic leadership while preparing for global expansion through its Reassure, Develop, and Create strategy," Motilal Oswal analysts said.

In the June-ended quarter, IndiGo's revenue from operations increased by 17.3 percent to Rs 19,570.7 crore, compared to Rs 16,683.1 crore in the same period last year. However, IndiGo's profit slipped by 12 percent year-on-year in Q1FY25.

Currently, 20 brokerages cover Interglobe Aviation stock, with 18 analysts recommeding a 'buy' on the counter, 1 suggested a 'hold' rating, and 1 shared a 'sell' call.

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