IndiGo reduces losses in Q1 as sales soar; is the aviation stock a good investment?

IndiGo reduces losses in Q1 as sales soar; is the aviation stock a good investment?

After the firm reported its quarterly earnings for the quarter that ended June 30, InterGlobe Aviation, the parent company of IndiGo, was trading more than 2% lower on Thursday morning. For the three months ending in June, the private carrier posted a combined net loss of Rs. 1,064.26 crores. The net loss decreased from the quarter-year-ago loss of Rs 3,174.18 crore. At Rs 12,855.3 crore, the company reported a 327 percent increase in consolidated sales.

On Thursday morning, IndiGo stock was trading down, but analysts believe there are good reasons to buy this low-cost airline company as a decline in crude oil prices and an uptick in air travel augur well for the aviation behemoth with a huge portion of India’s domestic market.

Should you Invest in IndiGo?

In a stable to decreasing crude market, according to analysts at Kotak Securities, Indigo’s spreads will increase. The fact that demand is strong outside of metro-to-metro (domestic and international) will further increase Indigo’s ability to use coverage, choose routes, and quicken spread improvement, they continued. Fuel costs for IndiGo increased sharply throughout the quarter, rising 392% from the same time last year. For an underdeveloped nation like India, where only the top 7% of the population flies, growth is also anticipated to remain healthy for a considerable amount of time. Kotak Securities raised their two-year forward earnings projection by 1-4 percent and set a fair value of Rs. 2,710 at 19X. Our spread estimate is Rs0.44 per ASK on a two-year forward basis, they added. The fair value pricing predicts a 37% increase.

“IndiGo reported remarkable improvement on the revenue front led by better yield,” said Prabhudas Lilladher. But rising fuel prices and greater FX losses continue to be a hindrance.”

“Price increases have influenced load factor, which is at 79.6%, which is still much below pre-COVID levels of 89%. We predict that seasonality and bad macroeconomic conditions will make the September quarter weak “It was an ad.

“We think IndiGo, with a market share of 55%, is better positioned than competitors. The following factors will help the company in the medium to long term: (1) demand recovery and capacity deployment (2) local and international network expansions (3) commodities softening (4) strong management (5) superior balance sheet; “said the brokerage.

“However, the cost environment of inflation and the depreciation of the rupee would continue to hinder profitability. Maintain “hold” with a new target price of Rs. 1,900 (previously, Rs. 1,800), “It read.

The brokerage firm predicted a significant uptick in air travel over the following two years and factored in a 35% CAGR in ASK over FY22-FY24E and an increase in EBITDA margin of 2,370bps over FY22-FY24E. “We think that going forward, IndiGo’s solid cash position will assist it to maintain its market share and pricing strength, which will fuel its total profitability. Despite additional cost rises, a turnaround would be supported by rising yield, disciplined pricing, and declining oil prices. analysts claimed. By the second half of the fiscal year, they forecast that fuel costs will return to normal. “It is the ideal move to profit from the Indian aviation sector’s rapid expansion. Reliance Securities continued, “We reiterate our BUY rating on IndiGo and maintain the Target Price of Rs 2,550. The target price predicts an increase of 29%.

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