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IndiGo shares hit record high, analysts expect stock to fly up to 18% higher
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
IndiGo share price: At least two brokerages have raised their target price on the stock following the firm’s decision to further expand its fleet.
The shares of IndiGo’s parent company InterGlobe Aviation rose almost 3% to hit an all-time high of ₹4,100 in intraday trade on BSE on May 2. At least two brokerages have raised their target price on the stock following the firm’s decision to further expand its fleet.
London-headquartered brokerage HSBC, which has a buy call on the stock, has raised its target price on the aviation stock to ₹4,445. This implies it sees a potential upside of more than 11% from the closing price of April 30.
The brokerage believes IndiGo’s strategic decisions to order 30 A350-900s aircraft and the purchase of rights for an additional 70 Airbus A350 family planes seem sensible.
The commentary comes as earlier this week in an analyst call, IndiGo said, it expects to double its fleet from over 350 planes currently to 600 by 2030. CEO Pieter Elbers claimed that no other airline in the world is inducting one aircraft every week like IndiGo.
The airline has an orderbook of around 1,000 narrow-body planes including the 500 aircraft ordered in June 2023.
Though it is too early to predict the outcome, HSBC is of the view that most of the drivers are favourable with product quality and execution holding the key. It added that despite strong competition, it looks like the airline’s well-supported strategy is sound.
Mumbai-based financial services firm Emkay Global also reiterated its positive stance on the aviation company. It has not only upgraded its rating from add to buy, but it has also raised the target price by 34% to ₹4,700. The target price implies a potential upside of 18%.
Also Read: IndiGo will be able to fly directly from Patna to Paris, says CEO Pieter Elbers
“The stock, despite its recent strong run-up, still has legs, given that competitors Air India/Akasa’s order books have higher exposure to Boeing (737 Max, facing safety issues) which implies risk to their near-term capacity adds,” the brokerage noted.
It asserted that Indigo, which is backed by a steady stream of Airbus deliveries, can gain market share and improve yields and it expects new airports in Noida (NCR) / Navi Mumbai to boost passenger traffic in one or two years.
Though fuel prices are contained, a spike would hit rivals more than IndiGo, diminishing competition for it, Emkay Global added.
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