How to become rich: This stock set for 27% return in 12 months, experts give buy call
Such upbeat in Indigo was surprising considering the airline's net profit had plummeted massively during December 2018 (Q3FY19) quarter.
While the benchmark Sensex index was trading on a cautious note, shares of Interglobe Aviation (Indigo) showed immense enthusiasm. The investors boosted the stock of Indigo so much that it had surged by nearly 5% in just few minutes of opening session. At around 1032 hours, Indigo stock price was trading at Rs 1,148.05 per piece, higher by Rs 40.10 or 3.62% on BSE. However, it has also touched an intra-day high of Rs 1,162.25 per piece resulting in overall rise of 4.90%. Such upbeat in Indigo was surprising considering the airline's net profit had plummeted massively during December 2018 (Q3FY19) quarter.
Indigo's net profit came in at Rs 190.9 crore which nosedived massively by 75% compared to the profit of Rs 762 crore a year ago same period. Even operating profit (EBIDTA) of Indigo plunged by 16% to Rs 1,681.4 crore in Q3FY19 versus Rs 2,001.9 crore in Q3FY18. EBITDA margin during the quarter stood at 21.2% as against 32.4% in Q3FY18.
For weak Q3FY19 profitability, Indigo blamed high fuel prices and currency depreciation.
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On the other hand, Indigo's revenue from operations stood at Rs 7,916.2 crore in Q3FY19, rising by 28.1% from Rs 6,177.9 crore in the corresponding period of the previous year. It was revenue from passenger tickets which continued its stellar performance for Indigo.
For the quarter, passenger ticket revenues were Rs 7,065.9 crore, an increase of 32.8% and ancillary revenues were Rs 8,051 million, an increase of 15.0% compared to the same period last year.
Going forward, Indigo expects fourth quarter fiscal 2019 year-over-year capacity to increase by 34% in ASKs.
Indigo is a market leader in its segment, and compared to other airlines like Jet Airways and SpiceJet, analysts are still very optimistic in Gurgaon-based carrier.
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In fact, if you buy Indigo shares now then you might become rich ahead because analysts has given a Buy call on this airline which pegs up to 27% return in one-year's time.
Gagan Dixit and Rachael Alva analysts at Elara Capital said, "Management indicates INDIGO’s long-term strategy is to first focus on trunk routes, then on tier-2 cities routes and then on international routes. Subsequently, we expect higher share of A321Neos on fleet addition for international routes during FY20 that bodes well for domestic market as industry’s supply addition would slow down."
The duo added, "We reiterate Buy rating with a TP of INR 1,471 on margins recovery from increase in airfares, drop in crude and reduction in capacity by Jet Airways. We maintain our FY21E EV/EBITDAR multiple at 8.0x, in line with global LCC peers."
In the long term, Nitin Bhasin and Ronil Dalal Research Analysts at Ambit Capital said, "We expect high-teen passenger demand (partly driven by discounts) to continue in India and remain positive on Interglobe which is well positioned to benefit from inability of peers to take it head-on-over a longer period due to weaker balance sheets and higher cost structure."
Analysts at Ambit thus added, "This gives us confidence in Indigo's ability to create opportunity in adversity. Indigo trades at 6.9x FY21E EV/EBITDAR."
Following which, Ambit has given a Buy rating as well on Indigo with a price target of Rs 1,448.
If we compare Indigo's intraday high price with the above expecations, then the airline will makes it investors richer by 27% ahead. Hence, an Indigo for an investment is one great deal!