IndiGo shares fly to record high as brokerages foresee strong growth, raise price targets

Shares of IndiGo operator InterGlobe Aviation surged over 4.3 percent to a record high of Rs 3,429.90 on March 26 morning as a slew of brokerages rolled out strong growth forecasts for the low-cost carrier after its analysts meet.

At 11.57 am, InterGlobe Aviation was trading at Rs 3,423 on the National Stock Exchange.

After the analyst meet on March 22, brokerages such as UBS Securities, Kotak Institutional Equities and Motilal Oswal Financial Services see a strong growth potential for IndiGo on the back of its expansion plans and strong growth projections for the country's aviation industry.

Motilal Oswal Financial Services feels that the Indian aviation market is highly underpenetrated currently, which provides huge room for growth for domestic players. The firm believes that the growth trajectory for domestic will be aided by increasing airport infrastructure and capacity additions in terms of aircraft orders, which could make India the third-largest aviation market in the world by 2035.

Other brokerages remain equally optimistic on the long-term growth outlook for the domestic air travel industry, with projections indicating a robust 15 percent compounded annual growth rate over FY24-30.

Brokerages have assigned price targets ranging from Rs 3,500 to Rs 4,300 for IndiGo, reflecting a potential upside of 7-31 percent from the previous close.

UBS Securities raised its target price by 2.5 percent to Rs 4,000, valuing the stock at 11 times its expected FY26 EV/EBITDA.

Even with considerations for increased crude prices and pilot salaries, UBS's projections remain bullish, driven by improved Available Seat Kilometer (ASK) growth and yields. However, the firm did highlight some potential upside risks to its yield estimates for IndiGo in the short term, as well as to capacity demand growth and profitability in the medium term.

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"We maintain our positive stance on IndiGo considering strong growth prospects of the Indian aviation industry, share gains in international travel, efficient cost structure and operational excellence," UBS said, as it retained its "buy" call on the stock.

Kotak also highlighted the shift in IndiGo's focus on connectivity to have a larger share of international journeys and investing in systems and operations.

"The near-term outlook is comforting on both ASK growth and pricing, reflective of IndiGo’s planning and strength of the underlying demand," the brokerage said in a note. Kotak raised its target price for the stock to Rs 4,300 while retaining its "buy" call.

ICICI Securities also has a positive view on InterGlobe Aviation led by favourable demand-supply equation and its strong position (balance sheet, market share, management strength and orderbook). Having met FY24 guidance on all fronts, IndiGo aims for early double-digit growth in capacity/passenger in FY25. ICICI Securities sees this in a good light considering the impact of grounding.

The brokerage has a 'buy' call on the stock with a price target of Rs 4,009.

MOFSL also stands impressed by IndiGo's three-pillar strategy for growth, namely, affordable fares, lower cancellations and on-time performance. It also seeks to enhance customer experience and invest in talent. Even though MOFSL remains optimistic, it still chose to retain its 'neutral' rating on the stock with a price target of Rs 3,510 as it believes the low-cost carrier would need to navigate through various challenges in the near to medium term.

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