With a potential upside of around 28%, UBS has raised its target price for Interglobe Aviation (Indigo) from Rs 4,000 to Rs 5,400. This choice was made in light of Indigo’s competitive valuation as well as projected increases in market share in foreign areas.
UBS Upgrades Target Price by 35 per cent
Key Points to Note:
Target Price Upgrade: UBS raised its target price for Indigo to Rs 5,400 in light of the company’s promising future growth.
Air travel Growth: According to UBS, the Indian air travel market would increase by double digits by FY30E, with demand expected to grow at a predicted 11–17% CAGR from FY24–30E.
UBS Upgrades Target Price by 35 per cent
- Increase in Market Share: Indigo is anticipated to grow its market share in international travel thanks to the arrival of A350 and A321 XLR aircraft in the medium to the long haul.
- EBITDA Growth: Driven by capacity expansion and margin enhancements, the brokerage projects a 13% EBITDA CAGR for Indigo over FY24–27E.
Estimation: At 11 times one-year projected EV/EBITDA, Indigo’s valuation is in line with historical trends and implies that it is more affordable than other equities linked to the Indian tourism industry. - Short-Term Prospects: – Q2 Difficulties: In the June quarter of FY25, UBS anticipates that seasonal factors and increased capacity from Vistara and Air India will impact Indigo’s profitability.
- Assessment Findings: According to UBS, Indigo is valued at 11 times projected EV/EBITDA and is nonetheless reasonably priced when compared to its competitors.
Advise for Investors:
According to UBS, investors may be able to take advantage of any brief declines brought on by increased supply, seasonal fluctuations, or increases in fuel prices.
On July 1, 2024, Indigo’s shares ended at Rs 4,225, indicating a tame reaction to the target price raise, despite the favorable long-term outlook.
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