InterGlobe Aviation rallies 6% post Q3; should you invest?
India’s biggest airline by market share posted profit of Rs 190 crore for October-December.
By ETMarkets.com | Updated:
NEW DELHI: Shares of InterGlobe Aviation that owns IndiGo rallied as much as 6 per cent on Thursday even as its Q3 profit crashed 75 per cent due to weak operating performance.
India’s biggest airline by market share posted a net profit of Rs 190 crore for October-December, down from Rs 762 crore a year earlier.
However, experts are reading these numbers from a different angle.
According to an ET report, being a dominant player with a strong balance sheet, IndiGo's gain would be higher than its peers. On the valuation front, considering FY20’s earnings, the airline is trading at an EV/EBIDTA of 8.73, which is quite attractive compared with its past 3-year average of 12.3.
The company’s December 2018 quarter financial performance is said to reflect the successful implementation of a carefully crafted strategy of gaining market share -- up 3 per cent in the past two quarters -- with a slight consideration for gaining pricing power in the industry.
In the December quarter, considered as a peak travel season, Indigo’s revenue per available seat km (RASK) fell by 3 per cent to Rs 3.7, compared with the same quarter last year. This fall is largely due to the airline’s conscious decision to install high capacity in the industry.
On its domestic operations, IndiGo is placed to gain considerably from soft fuel prices, which would add to its earnings in a meaningful way.
Brokerages have a mixed view on IndiGo after its Q3 financial results. JP Morgan maintained ‘Underweight’ with a price target of Rs 940. Yield improved, but load factor was the offsetting factor in RASK, according to the global financial services firm.
Morgan Stanley is ‘Overweight’ on the airline stocks with a price target of Rs 1,311. However, it said IndiGo's profits missed estimate on lower volumes, but inflection in the yield trend is a larger positive. Risk-reward is also looking attractive at current levels.
Credit Suisse has a ‘Neutral’ rating on IndiGo with a target price of Rs 1,075. It revised FY20 and FY21E earnings higher by 3 per cent and 9 per cent, respectively.
SBICAP retained ‘Buy’ call with a price target of Rs 1,234.
India’s biggest airline by market share posted a net profit of Rs 190 crore for October-December, down from Rs 762 crore a year earlier.
However, experts are reading these numbers from a different angle.
According to an ET report, being a dominant player with a strong balance sheet, IndiGo's gain would be higher than its peers. On the valuation front, considering FY20’s earnings, the airline is trading at an EV/EBIDTA of 8.73, which is quite attractive compared with its past 3-year average of 12.3.
The company’s December 2018 quarter financial performance is said to reflect the successful implementation of a carefully crafted strategy of gaining market share -- up 3 per cent in the past two quarters -- with a slight consideration for gaining pricing power in the industry.
In the December quarter, considered as a peak travel season, Indigo’s revenue per available seat km (RASK) fell by 3 per cent to Rs 3.7, compared with the same quarter last year. This fall is largely due to the airline’s conscious decision to install high capacity in the industry.
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On its domestic operations, IndiGo is placed to gain considerably from soft fuel prices, which would add to its earnings in a meaningful way.
Brokerages have a mixed view on IndiGo after its Q3 financial results. JP Morgan maintained ‘Underweight’ with a price target of Rs 940. Yield improved, but load factor was the offsetting factor in RASK, according to the global financial services firm.
Morgan Stanley is ‘Overweight’ on the airline stocks with a price target of Rs 1,311. However, it said IndiGo's profits missed estimate on lower volumes, but inflection in the yield trend is a larger positive. Risk-reward is also looking attractive at current levels.
Credit Suisse has a ‘Neutral’ rating on IndiGo with a target price of Rs 1,075. It revised FY20 and FY21E earnings higher by 3 per cent and 9 per cent, respectively.
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SBICAP retained ‘Buy’ call with a price target of Rs 1,234.
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