Just when the aviation sector was emerging from the Covid-19 shock, the surge in oil prices and signs of economic slowdown appeared as fresh headwinds, hitting the stocks of the sector.
Besides, cut-throat competition is also keeping the sectoral players under pressure. Shares of InterGlobe Aviation (IndiGo) hit their fresh 52-week high of ₹2,379 on November 16, 2021, but have been falling since then. At present, the stock is more than 23% down from its 52-week high. Year-to-date, the stock is down 9% while the benchmark Sensex is down about 4%.
MintGenie talked to experts to understand what the fundamental and technical factors indicate about the stock for the medium term. Here's what they said.
Avinash Gorakshakar, Head Research, Profitmart Securities
IndiGo is the largest private sector airline player enjoying a market share of 50%. After covid, the airline sector should benefit significantly due to the unlocking of restrictions and normalcy kicking in strongly. Strong tourist demand has resulted in ticket prices going up sharply as demand trends continue to remain strong.
Gorakshakar expects FY23 to be a strong year in terms of capacity utilization for IndiGo as load actors have improved significantly. The recent cut in ATF prices is also another positive and would benefit IndiGo in cutting fuel costs moderately.
However, high crude oil prices continue to be a challenge in the near term.
"In the longer term, we remain positive on IndiGo as the runway for future growth looks strong ahead. We are also confident that despite rising competition from new aspirants like Jet and Akansa, IndiGo will continue to maintain its market share going ahead," said Gorakshakar.
Prashanth Tapse, Vice President (Research), Mehta Equities
As improved travel dynamics stand positive for airlines and IndiGo is well placed with low-cost carriers (LCC), it’s the leading domestic air carrier in terms of domestic passengers flown.
The sector witnessed a sustained improvement in passenger traffic and IndiGo continues to penetrate the domestic market by launching operations at new locations and this is likely to help it maintain/further strengthen its hold in the sector.
"We remain optimistic given a solid balance sheet, efficient fleet and cost structure strategy which should help IndiGo to leverage and generate better yields in the longer term," said Tapse.
Kush Ghodasara, Independent Market Expert
Travel has been reaching pre-covid levels since April 2022 which is going to give a boost to the aviation industry's top line. Many people expect pressure in margins due to fuel price hikes but I believe Indigo has passed on most of the price hikes to fliers in the last two months.
On the other side, IndiGo has been increasing its flights on international routes and is expected to gain a larger pie of international fliers in the next few months which would have a healthy effect on the bottom line.
"Perhaps fundamentals look weak currently with negative earnings per share but it is expected to turn around in the next two quarters as the rise in passenger load factor will be on books. Recommend to buy stock on every dip with a stop loss of ₹1,516," said Ghodasara.
Akhilesh Jat, Category Manager - Equity Research, CapitalVia Global Research
Target price: ₹1950 | Stop loss: ₹1720
Shares price of InterGlobe Aviation surged nearly 20% from the recent low to surpass its 50 and 100-day exponential moving average (EMA) and has been continuously sustaining above the same. The counter has witnessed the upper breakout of the 'descending triangle' with marginally higher volume showing strength for the further upward movement.
On the downside, ₹1,730 may act as the support level, breaching this level can drag the prices lower to retest the ₹1,540 mark in near future, while on the upside, 1,820 (200-day EMA) will act as an immediate hurdle above this, we can expect a run-up towards 1,950+ level.
Additionally, momentum oscillator RSI continues its higher low formation and standing above the centreline and the MACD indicator is sustaining above zero with positive crossover suggesting prices may continue their upward movement in upcoming sessions as well.
Disclaimer: The views and recommendations made above are those of the individual analysts and not of MintGenie.