Share price of InterGlobe Aviation, parent company that operates IndiGo, fell on Tuesday after global rating firm Credit Suisse cut target price from Rs 1,850 per share from earlier Rs 1,900 per share.
Although the brokerage house maintained 'Outperform' rating on the stock of market leader Indigo, it has cut earnings estimates for FY20, FY21 and FY22 by 83%, 31%, and 18%, respectively.
Following the update, shares of InterGlobe Aviation touched an intraday low of Rs 1,334 apiece, declining 110 points or 7.6% against the previous close of Rs 1,444.30.
Stock price of InterGlobe Aviation trades higher than 50-day moving averages but lower than 5, 20, 100 and 200-day moving averages. The stock has moved below its 30 and 50-day simple moving average today.
It has fallen 3.14% in one week and over 5% in one month. However, it gained 6.8% year-to-date and 27% in one year. Market capitalisation of the large-cap stock stood at Rs 54,672 crore. Volume-wise, 1.5 and 35.5 lakh shares are changing hands on BSE and NSE counters, both above the 5, 10 and 30-day average volume.
Credit Suisse said it has estimated loss for Q4'FY20 for the Gurgaon-based low-cost carrier, on back of low current yields. Capacity addition by the airline is at a halt the brokerage said although it estimated strong earnings potential for the airline based on current pricing.
"We expect the company's earnings to revive as cost structure spike tapers off. Weak SpiceJet balance sheet and Air India divestment can be additional opportunities," it further added.
In January this year, the carrier reported a two-fold jump in net profit at Rs 496 crore for the third quarter ended December 31, 2019, helped by lower fuel prices coupled with higher passenger growth and higher operating income.
In another update, Confederation of Indian Industry in its recent report 'Novel Coronavirus in China and its impact analysis' said that IndiGo and Air India have halted operations to China and the temporary suspension of flights to China and Hong Kong would lead to the carriers missing out on gross revenue targets.
JM Financial in its report dated February 16 2020 'COVID-19: Mysterious virus, mixed impact' also suggested that the carriers SpiceJet and IndiGo will face a negative impact on revenues from weaker demand in South-East Asia due to virus outbreak. However, it added the airline's weak revenues are likely to be offset by falling crude oil prices.
Meanwhile, Kotak Institutional equities in its report on February 18, 2020 said, "Listed airlines such as IndiGo and SpiceJet have even lesser dependence on China. However, with COVID-19 situation still evolving, should it have a larger impact on international air travel due to travel restrictions as well as postponement/cancellation of discretionary travel by air passengers, it could have a negative impact on India's air traffic growth."
Edelweiss in its report published on February 19, 2020 also cut the target price for IndiGo stock to Rs 1,297 and rated it 'REDUCE'.