scorecardresearchIndiGo stock check: Down 15% from one-year peak; is it a good time to buy?

IndiGo stock check: Down 15% from one-year peak; is it a good time to buy?

Updated: 24 Mar 2023, 04:58 PM IST

Emkay Global has a ‘buy’ call on the stock with a target price of 2,600. Kotak Institutional Equities also has a ‘buy’ call on the stock with a target price of 2,550.

InterGlobe Aviation is one of the largest airline operators in India.

InterGlobe Aviation is one of the largest airline operators in India.

Shares of InterGlobe Aviation (IndiGo) fell 2.43 percent to close at 1,862.25 on March 24, breaking the winning run of the last four consecutive sessions.

After registering the top of 2,194 on February 6, 2023, this counter has corrected 15 percent.

IndiGo stock in the last one year.

We collated views of brokerage firms and technical analysts to understand the fundamental and technical factors of the stock. Here's what they said.

Fundamental views

Brokerage firm: Emkay Global Financial Services

Emkay has a ‘buy’ call on the stock with a target price of 2,600.

The brokerage firm is bullish on the stock due to factors, including relentless Indian passenger traffic growth, supporting PLFs (passenger load factors) and yields and easing fuel cost pressures.

Emkay highlighted that India’s air passenger traffic growth continues to be resilient with Q4FY23 showing strong numbers despite being a seasonally lean quarter.

"Domestic pax (the number of passengers) in FY23 would be nearly 13.6 crore, slightly above our earlier estimate of 13.5 crore; while going by March 2023 run-rate, FY24 could easily hit our 16.5 crore estimate with a high chance of bettering it," said Emkay.

"Against our 15 percent medium-term pax CAGR, net fleet addition (despite Air India’s mega order) should be 10-11 percent, thereby keeping theoretical supply lower than demand, which would support PLFs and yields," Emkay said.

Fuel costs have come down further with crude as well as jet kero prices correcting.

The recent commentary by airlines, industry bodies, and MoCA officials implies a strong outlook for the Indian aviation sector, as is evident from new order announcements, regulatory approvals w.r.t. wet-leasing, and airport infra development.

"Indigo, with its dominant position, low-cost leadership, and running order book of 487 aircraft, is best-positioned to capture the sectoral drivers. The summer schedule with nearly 20 percent lower flights year-on-year (YoY) for other airlines as a whole versus 3 percent growth for Indigo implies the latter is well placed in terms of near-term capacity availability, despite 34 AOGs (aircraft on ground) (102 for the industry)," said Emkay.

Brokerage firm: Kotak Institutional Equities

The brokerage firm has a ‘buy’ call on the stock with a target price of 2,550.

"IndiGo in its analyst meeting highlighted its focus on cost leadership and expanding international revenues. It expects the domestic market to recover from the seasonality seen during 4QFY23 and has plans to increase the share of international ASKs (available seat kilometres) to 30 percent over the next few years, with codeshare agreements," said Kotak.

"Near-term pressure on yields is due to lower demand and fuel prices. Yield movement will be led by demand, load factor and route optimization in the future," Kotak said.

Technical views

Analyst: Jigar S. Patel, Senior Manager of Equity Research at Anand Rathi Share and Stock Brokers

At present, IndiGo has made a nice base near the 1,850-1,870 levels. On the indicator front, price action is still inside the daily alligator with a daily RSI around 50 levels which is a matter of concern.

"One should wait for a decisive close above 1,920 on a daily close basis for fresh longs. The upside target is expected at 2,000 with a stop loss of 1,865," said Patel.

Interglobe Aviation technical chart.

Analyst: Vaishali Parekh, Vice President - Technical Research, Prabhudas Lilladher

The stock has witnessed some consolidation near the significant 200DMA (daily moving average) level of 1,890 taking support near the long-term trendline support zone.

A decent move past 1,920, which is also where the important 50EMA (exponential moving average) lies, should trigger a breakout for a fresh upward move to 2,050 in the coming days.

"On the downside, the support zone visible is near the 1,820-1,830 zone below which, the trend can turn very weak. The RSI is gradually on the rise showing strength and so the chances of a breakout in the near future cannot be ruled out," said the analyst.

Interglobe Aviation tech chart

According to a MintGenie poll, 22 analysts on an average have a ‘strong buy’ call on the stock.

Disclaimer: The views and recommendations given in this article are those of individual analysts and broking firms. These do not represent the views of MintGenie.


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First Published: 24 Mar 2023, 03:19 PM IST