Brokerage sees 37% upside in Interglobe Aviation stock. Do you own it?

InterGlobe Aviation, which operates airlines IndiGo is expected to perform well with its dominant position, low-cost leadership, and running order book of 487 aircraft. Brokerage Emkay Global believes the carrier is ‘best-positioned to capture the sectoral drivers’ ahead. 

In a research note, Emkay Global said, shares of InterGlobe Aviation, which operates IndiGo is well placed in terms of near-term capacity availability.

The brokerage has maintained a 'Buy' rating with a target price of ₹12600, implying a 37.4 per cent upside potential from its current levels.

In YTD time, InterGlobe Aviation share price has slipped to ₹1,891, logging more than 7.46 per cent loss in 2023. The stock's 52-week high is ₹2,194 apiece and 52-week low is ₹  1,513.3 apiece, respectively. Its market capitalisation is ₹72,825.99 crore.

The brokerage in its report said that India’s air passenger traffic growth continues to be resilient with Q4FY23 despite being a seasonally lean quarter. It said that the domestic passenger traffic in FY23 would be around136 million, slightly above the earlier estimate of 135million; while going by March 23 run-rate, FY24 could easily hit 165million estimate.

“Domestic pax in FY23 would be 136mn, slightly above our earlier estimate of 135mn; while going by Mar-23 run-rate, FY24 could easily hit our 165mn estimate with a high chance of bettering it. Against our 15% medium-term pax CAGR, net fleet addition (despite Air India’s mega order) should be 10-11%, thereby keeping theoretical supply lower than demand, which would support PLFs and yields,” Emkay report said.

“The recent commentary by airlines, industry bodies, and MoCA officials implies a strong outlook for the Indian aviation sector, as is evident from new order announcements, regulatory approvals w.r.t. wet-leasing, and airport infra development. Indigo, with its dominant position, low-cost leadership, and running order book of 487 aircraft, is best-positioned to capture the sectoral drivers," it added.

IndiGo posted a net profit of ₹1,418 crore in Q3 after being in the red for the previous three quarters.

"The summer schedule with 20% lower flights YoY for other airlines as a whole vs. 3% growth for Indigo implies the latter is well placed in terms of near-term capacity availability, despite 34 AOGs (102 for the industry). We reiterate Buy with a TP of Rs2,600,” Emkay said.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.