Geojit has given Accumulate recommendation for Inter Globe Aviation with a target price of Rs. 1984 in its research report issued on Jun 09, 2021
Geojit’s research report on Inter Globe Aviation
Revenue declined by 25% YoY, but on sequential basis revenue grew by 27% QoQ, led by recovery in passenger growth. Profitability was impacted by higher fuel cost, depreciation, lease rentals, & lower other income. Q1FY22 profitability is likely to be impacted by Covid second wave given sharp drop in passenger growth in April & May. However, we expect passenger traffic to pick-up gradually starting from Q2FY22 & expect revenue growth to normalize in H2FY22 led by acceleration in vaccination and as impact of Covid second wave subsides. Faster replacement of old aircrafts with 15% more fuel efficient fleets will improve profitability in the medium term. Sale & lease back operations, cost rationalization and healthy cash position will help in tiding over the crisis situation. Further, the board has approved fund raising plans through QIP. We remain positive on the stock in the long term, given expansion of capacities, penetration into Tier 2-3 cities, focus on route optimization and likely market share gains post Covid era.
Outlook
We value Indigo at P/E of 18x on FY23E, however given near term earnings volatility and sharp movement of share prices, we downgrade Indigo to Accumulate with a target price of Rs. 1,984.