Buy InterGlobe Aviation; target of Rs 1438: Geojit

Geojit’s research report on InterGlobe Aviation

InterGlobal Aviation Ltd (Indigo) is one of the most efficient low cost carriers (LCC) with a market share of 40% in Indian aviation sector. Q4FY18 reported Revenue grew by 20% YoY. But negatively impacted with a 73% YoY fall in PAT due to higher discounts and rise in fuel cost. Going forward we expect pass through of higher fuel cost leading to improvement in margin. As engine issues have been resolved; going forward aggressive capacity addition and cost rationalisation will help Indigo in maintaining its competitive advantage. We trim our EPS estimates by 6% to factor in higher fuel prices and expect earnings to grow by 20% CAGR over FY18-20E.

Outlook

We lower P/E multiple valuation to 17x (20x earlier FY19E) given near term impact on margins while we roll forward to FY20E, with target price of Rs1,438 and maintain toBUY.

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