Prabhudas Lilladher has given Hold recommendation for InterGlobe Aviation with a target price of Rs. 1950 in its research report issued on Dec 16, 2021
Prabhudas Lilladher’s research report on InterGlobe Aviation
We interacted with IndiGo wherein they articulated their long term plan of responsibly maximizing unit revenues with sustained focus on reducing unit costs. Post pandemic, IndiGo continues to pursue & develop multiple revenue streams in the form of 1) fortifying domestic network aided by regional expansion (Fleet of 30+ ATR) 2) widening international network with the help of longer range aircraft (A321neo; A321 XLRs – mid 2024) and 3) freighter operations. With increasing stage lengths, IndiGo is also looking to reimagine its product in order to align it with consumer needs. However, with likely increase in competitive intensity on entry of new players, IndiGo remains focused on being the lowest cost operator through 1) sweating the assets better 2) higher seat count 3) long term relationship with lessors (further strengthened in the pandemic) and 4) refreshing the fleet with fuel efficient A320neo family. We continue to prefer IndiGo in the Airline space and expect it to emerge stronger post Covid given 1) superior balance sheet (Rs63bn free cash) 2) industry leading cost structure and 3) strong management team.
Outlook
We value the stock at 9x Sep23 adj. EV/EBITDAR and arrive at a target price of Rs1,950/. However, we believe CMP bakes in most positives and with near term uncertain due to possible spread of Omicron variant, we recommend awaiting better entry points. Maintain HOLD.