IndiGo becomes India's first airline to cross Rs 1 lakh crore m-cap mark; stock up 4%

InterGlobe Aviation Ltd, IndiGo‘s parent, on Wednesday became the country’s first airline with a combined market capitalisation (m-cap) of more than Rs 1 lakh crore. The company’s turnover stood at Rs 9.20 crore on BSE, commanding a m-cap of Rs 1,01,007.56 crore. The stock today climbed 3.55 per cent to settle at Rs 2,619.85 over its previous close of Rs 2,529.95. The scrip has gained more than 28 per cent in 2023 so far. The share price has been witnessing a rise after Wadia Group-owned Go First filed for insolvency.

Earlier this month, IndiGo announced a massive order of 500 Airbus Neo family aircraft, to be delivered between 2030 and 2035. The deal, worth $50 billion, is the biggest single purchase agreement in aviation history.

“This 500 aircraft order is not only IndiGo’s largest order, but also the largest-ever single aircraft purchase by any airline with Airbus. The engine selection for this order will be done in due course and so will be the exact mix of A320 and A321 aircraft,” the no-frills airline said.

Foreign brokerage UBS has upgraded its target price for IndiGo to Rs 3,300 from an earlier target of Rs 2,690. IndiGo, UBS said, remains very well equipped to tackle any downcycle and can handle any sharp up move in crude or the US dollar without significant cash burn.

UBS mentioned that the improved outlook is driven by strong underlying demand lifting passenger load factors (PLF), higher yields, suspension of Go First’s operations and lower fuel cost due to falling crude prices.

The foreign brokerage expects the June quarter EPS (earnings per share) at Rs 82 for Q1 FY24, up 37 per cent over IndiGo’s record-high annual EPS in FY18.

It estimated Q1 yields to grow 6 per cent, sequentially, available seat kilometres (ASK) to grow 7 per cent, quarter-on-quarter (QoQ) or 18 per cent year-on-year (YoY), with PLF at 89 per cent, implying revenue passenger kilometres (RPK) growth of 13 per cent QoQ (32 per cent YoY).

“There remains plenty of headroom for international travel growth and we expect this to be a key driver of IndiGo’s future growth. International yields remain similar to domestic yields, but with a better cost structure (lower taxes on fuel and better efficiency considering long rides). We moderate our yield estimate from Rs 5.13 in FY23 to Rs 4.65 for FY25E and expect ASK growth of 18 per cent in FY24 and 15 per cent in FY25,” UBS stated.

With Tata’s acquisition of Air India, the Indian aviation sector has become a near duopoly, boding well for pricing, UBS further said.

Meanwhile, Indian equity benchmarks rose sharply to close at their fresh record closing highs. The 30-share BSE Sensex pack surged 499 points or 0.79 per cent to settle at 63,915, while the broader NSE Nifty index moved 155 points or 0.82 per cent higher to finish the day at 18,972. The domestic benchmarks would remain closed on Thursday for the Eid holiday.

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