InterGlobe Aviation shares up 27% in 2 months, scale 52-week high. Can they hit Rs 3,000 level?

InterGlobe Aviation has seen its shares rallying 27 per cent in two months, yet a couple of brokerages expects the stock could rise up to Rs 3,000 levels. The scrip, which hit its fresh 52-week high on Friday and was on the verge of scaling its November 2021 high, is seen gaining on InterGlobe's favourable supply-demand and strong balance sheet. 

ICICI Securities, which recently hosted the senior management of InterGlobe Aviation, said it maintained a tight-supply outlook on Indian aviation in the domestic segment in near to medium term on the back of replacement cycle by big players like IndiGo and Tata group, weaker balance sheet for smaller airlines post Covid, and internationalisation of Indian airlines. 

"This results in a good yield outlook and, in turn, profitability. Spreads may further benefit from an increase in international mix apart from any movement in crude prices. InterGlobe management’s guidance on volumes in FY24 remains firm (>15 per cent growth in ASK), which is reassuring in the context of the global engine supply crisis," ICICI Securities said while suggesting a target of Rs 3,000 on the stock.   

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Prabhudas Lilladher, which has a target of Rs 2,565 on the stock, has increased its Ebitdar estimates of FY24 by 7 per cent and FY25 by 8 per cent amid sustenance in yields, given recent competitive development and stable fuel costs. 

For the March quarter, Prabhudas Lilladher said, InterGlobe Aviation reported a strong performance with revenues of Rs 14,200 crore (against its estimate of Rs 13,500 crore)  and an Ebitdar margin of 18.7 per cent  (excluding forex gains) aided by lower fuel CASK of Rs 1.85. 

"We believe IndiGo is well placed to strongly benefit from demand recovery along with capacity deployment (aiming for a fleet size of 350 in FY24E), 2) network expansion in domestic as well as international markets (30 new destinations already added in 4QFY23) 3) superior balance sheet (Rs 122bn free cash) and 4) possible market share/yield gains that could accrue from grounding of one of the competitors," it said. 

Emkay Global has a target of Rs 2,700 on InterGlobe Aviation. In a recent note, Emkay noted InterGlobe Aviation has witnessed steady demand and healthy yields in Q1FY24 to date. It has added one more B777 on wet lease on the Mumbai-Istanbul route. InterGlobe Aviation has maintained ASK growth guidance of 17-18 per cent YoY for FY24, while Q1FY24 is expected to see an increase of 5-7 per cent QoQ. Pax target is 10 crore, while net fleet addition is seen at 40-50. 

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"InterGlobe Aviation is on track to improve its international contribution from 23 per cent to 30 per cent in FY24E. It has healthy cash on books at Rs 23,400 crore (including Rs 11,200 crore restricted cash), while gross debt (excluding operating lease liability) is Rs 3,300 crore. We reiterate Buy with a raised target of Rs 2,952 (from Rs 2,687). We remain positive, given INDIGO’s strong balance sheet, favorable demand growth environment and ramp-up in international traffic," Elara Securities said. 

Nuvama finds the stock Rs 2,703 worthy. It said InterGlobe Aviation intends to increase its capacity by 15 per cent in FY24 and doubling its fleet by 500 aircraft by FY30. Further, replacement of CEOs with NEOs shall lift yields, it said. 

"A likely duopolistic industry structure dominated by Indigo and Air-India bodes well. Near-term: Robust demand along with growing International business to drive PAX growth. Long-term: XLRR fleet-adds and improved cargo business shall raise competitiveness," the brokerage said.

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