IndiGo Shares Hit Record With Analysts Bullish On Long-Term Growth Prospects

Shares of InterGlobe Aviation Ltd. hit an all-time high on Tuesday as analysts are bullish on the airline's long-term growth prospects despite short-term hiccups.

IndiGo hosted its analyst meet in Gurgaon on March 22 and remains bullish on the long-term growth for the air travel industry in India, UBS Research said in a report.

The brokerage maintains a positive stance on the market leader considering strong growth, share gains in international travel, efficient cost structure and operational excellence.

Multiple growth drivers are intact for the industry despite the recent increase in crude prices and currency depreciation, according to Citi Research. "A combination of supply growth and demand acceleration is likely to result in doubling of Indian aviation passengers over FY24–FY30."

While low-cost aids profitability, healthy on-time performance and low cancellation rates support IndiGo's market share, the brokerage said. "However, the most compelling competitive advantage emanates from IndiGo's expansive route network, which currently includes 88 domestic and 33 international destinations."

Citi maintains a 'buy' rating with a target price of Rs 3,700 apiece, while UBS has a 'buy' call with a target price of Rs 4,000 per share, implying an upside of 11.5% and 20% respectively from the current market price. Morgan Stanley maintains an 'overweight' rating at a target price of Rs 4,145 apiece, an upside of 25%.

Overall, the company was positive on the outlook and FY25 growth guidance was ahead of Morgan Stanley's estimates, the brokerage said.

Morgan Stanley said the airline will receive a new aircraft each week in the next financial year. "Given 5-to-7 years-plus lead times and tight aircraft capacity globally, Indigo will get one new aircraft per week in 2024. This reflects multi-year planning."

• Citi Research maintains 'buy' with a target price of Rs 3,700 apiece.

• FY24 guidance achieved, FY25 guidance encouraging.

• Supply growth, demand acceleration likely to double Indian aviation passengers over FY24–30.

• Lower cost aids profitability, healthy on-time performance and low cancellation rates support market share.

• Addition of A321 XLRs to expand serviceable radius, aid further passenger growth.

• Expects some increase in salary expense from regulatory changes effective June 1.

• Incremental regulatory cost is likely to be passed on to flyers.

• Key risks are higher ATF prices from rising crude prices and higher cost pressures from depreciating Indian rupee.

• Morgan Stanley maintains 'overweight' rating at Rs 4,145 target price.

• Company to add one new aircraft per week in 2024.

• Management aims for double-digit capacity growth in FY25 vs brokerage estimate of 6%.

• Morgan Stanley maintains 'overweight' rating at a target price of Rs 4,145 apiece.

• Investor day reinstates confidence in industry and company's prospects.

• The company remains bullish on long-term growth for the air-travel industry in India.

• The brokerage continues to see upside risks to yields in the near term, and demand growth and profitability over the medium term.

• Company indicated strong demand and year-on-year moderation in growth is driven by constrained supply.

• The near-term trends remain positive and should lead to consensus estimate upgrades.

IndiGo's stock rose as much as 2.15% during the day to Rs 3,357.50 apiece on the NSE. It was trading 0.66% higher at Rs 3,308 per share, compared to a 0.27% decline in the benchmark Nifty 50 as of 9:40 a.m.

The share price has risen 80.37% in the last 12 months. The relative strength index was at 62.

Seventeen out of the 22 analysts tracking the company have a 'buy' rating on the stock, three recommend 'hold' and two suggest 'sell', according to Bloomberg data. The average of 12-month analyst price targets implies a potential upside of 7%.