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Buy InterGlobe Aviation; target of Rs 2188: Geojit

Geojit is bullish on InterGlobe Aviation recommended buy rating on the stock with a target price of Rs 2188 in its research report dated February 25, 2022.

February 28, 2022 / 02:13 PM IST
 
 
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Geojit's research report on InterGlobe Aviation

InterGlobal Aviation Ltd (Indigo) is one of the most efficient low cost carriers (LCC) with a market share of 54% in Indian aviation sector. Revenue grew by 89% YoY, was better than expected led by strong passenger growth & higher ancillary revenues. Strong EBITDA & Profitability due to strong utilization owing to recovery in passenger growth and better yields. Improved vaccination drive and decline in infections led to higher passenger load factor. Replacement of old aircraft with fuel efficient fleet is at an accelerated pace, which is expected to be completed by FY24, will bring down operating cost. Passenger traffic growth to pick-up at higher pace starting from FY23 given lower risk of infections, acceleration in vaccination and recovery in tourism & corporate travel. Capacity expansion, penetration into Tier 2-3 cities, focus on route optimization and likely market share gains post Covid era are key positives. Rise in ATF price is a key risk, but considering higher capacity utilization, cost rationalization, removal of capacity restrictions, relaxation in fare cap and healthy cash position, will limit the downside risk.

Outlook

We value Indigo at P/E of 15x (7.0x EV/EBITDA) and upgrade to Buy with a target price of Rs2,188.