Morgan Stanley Affirms Overweight On InterGlobe Aviation, Lifts Target Price
Morgan Stanley raises its target price on Indian aviation major IndiGo to 5,245 rupees from 5,142 rupees per share following its quarterly results
(The Corner Office Journal) -- Morgan Stanley reiterated Overweight call on Indian aviation major InterGlobe Aviation Ltd. and raised its target price to 5,245 rupees from 5,142 rupees per share following its quarterly results.
The company, which operates India’s largest airline IndiGo and trades on the National Stock Exchange with INDIGO symbol closed at 4,439.30 rupees yesterday.
IndiGo’s 1QFY25 was in-line with Morgan Stanley estimates, the brokerage said in an investor note.
Morgan Stanley said the company’s 1Q revenue rose 17% year-on-year to 195.7 billion rupees. While passenger ticket and ancillary revenues grew by 10% YoY and 14% YoY, respectively, (largely in-line with MS estimates), its other operating income grew to 13.1 billion rupees in 1Q from 1.4 billion rupees a year earlier, it added.
This was driven by the accrual of compensation that was finalized with the original equipment manufacturer for aircraft on ground, the brokerage said.
Morgan Stanley said the company’s 1Q EBITDA came in at 52 billion rupees (+7% YoY) against MSe of 47 billion rupees and net profit, excluding forex loss of 575 million stood at 27.8 billion rupees.
The brokerage said IndiGo expects its available seat kilometers (ASKM) to rise by a high single digit YoY in 2QFY25 (implying a 4%-5% quarter-on-quarter growth), while passenger revenue per available seat kilometers (RASKs) to remain flat YoY in 2Q. For FY25, the company maintained its guidance of 'early double digit' growth, it said.
Morgan Stanley affirmed its Overweight call on IndiGo due to following reasons:
--Air travel market is likely to see strong growth: FY26 will see two large airports coming up, and this will further expand the air travel market.
--Industry is more consolidated now and IndiGo's peers have high costs per seat and leveraged balance sheets.
--IndiGo 2.0: The focus is on business class and international long-haul operations, both of which have better profits per seat.
--Valuations are still attractive at FY26 EV/EBITDA of 8x vs pre-Covid median of 8.5x.
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