Geojit Financial
InterGlobe Aviation (Buy)
Target: ₹1,804
CMP: ₹1623.15
InterGlobe Aviation Ltd (Indigo) is one of the most efficient low cost carriers (LCC) with a market share of 43 per cent in Indian aviation sector.
Revenue declined by 51 per cent y-o-y, but on sequential basis revenue grew by 79 per cent q-o-q, led by improvement in passenger growth. Resumption of flight operations, cost rationalization and healthy cash positions is helping the company in tiding over crisis situation.
With passenger traffic gradually reaching to pre-Covid levels, revenue growth to normalize in FY22 led by better utilization of fleet and relaxation in price caps.
Management focus expansion of international footprints and deeper penetration into Tier 2-3 cities, to drive growth in near future. While replacement of old aircraft with 15 per cent more fuel efficient fleets will improve profitability in the medium term.
Strong balance sheet position compare to its peers, focus on route optimisation & cost rationalisation and likely market share gains, we remain constructive on the stock in the long term.
We roll forward to FY23 and value Indigo at P/E of 18x with a target price of ₹1,804 and upgrade to Buy.