AgenciesMUMBAI: HSBC has downgraded InterGlobe Aviation to 'reduce' from 'hold' as they believe the stock is expensive and it does not see any potential positive catalysts. It has maintained a 'buy' rating on SpiceJet as it expects potential tailwinds for the stock from the return of 737 MAX aircraft, Boeing compensation and potential for a reduction in its ownership cost.
HSBC has revised target price on InterGlobe to Rs 1490 from Rs 1290 and on SpiceJet to Rs 125 from Rs 80.
For the overall industry of aviation, the brokerage believes the Covid-19 vaccines are a strong catalyst.
"HSBC has downgraded InterGlobe Aviation to reduce from hold as it believes the stock is now expensive and there are no positive catalysts. It has retained buy rating on SpiceJet on expectations of potential tailwinds for the stock from the return of 737 Max aircraft, Boeing compensation and potential for a reduction in its ownership costs," said HSBC.
The government's move to increase flight capacity limit to 80 per cent could help the industry reduce losses slightly, said HSBC.
"We think that the industry should be able to fly this incremental capacity on its average network load factor albeit at lower rates. Given that the costs of this incremental capacity would be limited to fuel, airports and part of maintenance anad salary, we think it could be profit accretive," said HSBC.
HSBC said weakening traffic mix and the slow recovery in international demand remain concerns.
High end corporate travel could see a structural decline as technology could replace some portion of corporate travel, said HSBC.
HSBC has revised target price on InterGlobe to Rs 1490 from Rs 1290 and on SpiceJet to Rs 125 from Rs 80.
For the overall industry of aviation, the brokerage believes the Covid-19 vaccines are a strong catalyst.
"HSBC has downgraded InterGlobe Aviation to reduce from hold as it believes the stock is now expensive and there are no positive catalysts. It has retained buy rating on SpiceJet on expectations of potential tailwinds for the stock from the return of 737 Max aircraft, Boeing compensation and potential for a reduction in its ownership costs," said HSBC.
The government's move to increase flight capacity limit to 80 per cent could help the industry reduce losses slightly, said HSBC.
"We think that the industry should be able to fly this incremental capacity on its average network load factor albeit at lower rates. Given that the costs of this incremental capacity would be limited to fuel, airports and part of maintenance anad salary, we think it could be profit accretive," said HSBC.
HSBC said weakening traffic mix and the slow recovery in international demand remain concerns.
High end corporate travel could see a structural decline as technology could replace some portion of corporate travel, said HSBC.
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