Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  

| More

InterGlobe Aviation - Play on Covid recovery - ICICI Securities

Posted On: 2020-10-30 08:25:39

InterGlobe Aviation (IndiGo) will remain one of the biggest beneficiaries of expected recovery from Covid with healthy signs of return of air traffic, steady PLFs complemented by strong balance sheet. The pace of cash erosion has slowed down with the liquidity measures taken by the company has added to the business strength. However, expected delay in return of corporate traffic could lead to lower fares, which will put pressure on earnings in FY21. Post the 40% rally in stock price over the past three months, we downgrade the stock from Buy to ADD.

- Air traffic has seen steady recovery.... Daily fliers have increased from 60k in May to ~180k in October. IndiGo also has managed to increase traffic from 1.2mn passengers in Q1FY21 to 5.2mn passengers in Q2FY21 with improvement in PLF from 61% to 65% in the same period. However, recovery hereon will depend on return of corporate travel, which might take time. Compared to Q2FY20, 37% of the capacity was deployed in Q2FY21 with an exit rate of 47%. Company aims to operate at 60% of Q3FY20 capacity in Q3FY21. Management believes the government will soon increase this permissible capacity beyond 60%.

- ....but fares will remain under pressure: The available traffic now is in the VFR (visiting friend and relatives) category, which is price sensitive. Hence, yields are unlikely to increase. The price-inelastic demand usually is with the business travel, which is not there now. Hence, the yields are likely to dampen going ahead, will be definitely lower YoY. The trends too have not been great in the festive season till date. Additionally, with increasing traffic (government is likely to allow 75% of the capacity to fly from start of CY21), hence the yields will come under further pressure.

- Fare print was weak in Q2FY21. There was estimated 15% sequential decline in fares for IndiGo, which led to higher than expected losses. While expenses were broadly in line, there was an increase in finance cost in line with lease liability (Rs180bn as of H1FY21 compared to Rs156bn in FY20) and depreciation in with Rights of Use (Rs159bn as of H1FY21 vs Rs142bn in FY20) while other income declined on account of lower investment yields (Rs6.6bn as of H1FY21 vs Rs8.1bn in H1FY20).

- Balance sheet concerns largely over with improving earnings and measures taken by the company. Cash burn reduced from Rs300mn per day in Q1FY21 to Rs250mn in Q2FY21. Company has also got Rs6bn working capital line from a bank. Of the total Rs66bn additional liquidity (including the newly available credit line), 50% has been availed of by the company in H1FY21. As such, QIP decision has been postponed to Dec'20.

- Our Rs90 EPS estimate factors-in complete traffic recovery in FY22 to FY20 levels. This can manifest from market share gain (if there are capacity curtailments by other airlines, which too will support fares) or organic demand recovery (several consumer discretionary sectors have already seen recovery to pre-Covid levels). Based on 20x core EPS of Rs57 and free cash balance of Rs102bn, we downgrade the stock from BUY to ADD with a target price of Rs1,400. We factor-in RASK/CASK(including depreciation and interest) to move from Rs3.72/3.74 in FY20 to Rs3.76/3.46 in FY22E. CASK savings will be driven by fleet efficiency and cost savings

Shares of InterGlobe Aviation Ltd was last trading in BSE at Rs.1308.65 as compared to the previous close of Rs. 1331.2. The total number of shares traded during the day was 114728 in over 5976 trades.

The stock hit an intraday high of Rs. 1346 and intraday low of 1296.75. The net turnover during the day was Rs. 151709030.

Source: Equity Bulls

Click here to send ur comments or to

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only., its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.

Other Headlines:

Upgrade in target price of IDFC First Bank - Angel Broking

Laurus Labs stake acquisition in Richore Lifesciences - Angel Broking

Shares of Lakshmi Vilas Bank (LVB) suspended from trading - Angel Broking

Initiating Coverage on Sundram Fasteners - Fastening growth - HDFC Securities

Astral Poly Technik - Scalability to further improve with storage tanks foray - ICICI Securities

Vardhman Special Steel - Q2FY21 Company Update - ICICI Direct

Initiating Coverage - Advanced Enzyme Technologies - ICICI Direct

L&T - Secures Large Contract - Nov 25, 2020 - Angel Broking

Alembic Pharmaceuticals - Tentative Approval for JV - Angel Broking

Drug launch by Lupin - Tacrolimus Capsules - Angel Broking

Gujarat Gas - Nov 25, 2020 - Angel Broking

Metropolis Healthcare - Nov 25, 2020 - Angel Broking

NTPC - Showcase of strength & competitiveness - ICICI Securities

Telecom - Market Share TRACKER - Bharti is narrowing the gap on incremental market share vs RJio - ICICI Securities

Cochin Shipyard - Q2FY21 Result Update - ICICI Direct

Engineers India - Q2FY21 Result Update - ICICI Direct

Rupee - Nov 24, 2020 - Reliance Securities

FMCG Sector Update - Recovery unlocked; lower growth divergence - HDFC Securities

Engineers India - Consultancy segment outperformance - ICICI Securities

Engineers India - Q2 FY21 Result Update - YES SECURITIES

Motherson Sumi Systems - Company Update - Virtual Investor Conference - ICICI Direct

Mutual Fund Review - November, 2020 - ICICI Direct

Sadbhav Engineering - Q2FY21 Company Update - ICICI Direct

IRB Infrastructure - Q2FY21 Company Update - ICICI Direct

Vodafone Idea fund raising - Angel Broking

Rupee - Nov 23, 2020 - Reliance Securities

Crude Oil - Nov 23, 2020 - Reliance Securities

Q2FY21 Bank Result Quick Review - Angel Broking

Banks & NBFC's Sector Update Report - Yet another watershed moment? - HDFC Securities

Galaxy Surfactants - EBITDA/kg has an upside risk - ICICI Securities

Diagnostics - COVID-19 tests continue to trend higher - ICICI Securities

Banking & Financial Services - Sector Update - Nov 22, 2020 - ICICI Direct

Dalmia Bharat Sugar - Q2FY21 Company Update - ICICI Direct

Balkrishna Industries - Industry export growth momentum continues - ICICI Securities

Covid Recovery Pulse - Festive positivity continues in auto retails, E-way bill generation improves... - ICICI Direct

Quant Pick - Exide Industries - ICICI Direct

Shankara Building Products - Q2FY21 Company Update - ICICI Direct

Triveni Engineering - Q2FY21 Company Update - ICICI Direct

Initiating Coverage on Sudarshan Chemical - Leaping into the league of giants - HDFC Securities

Earnings Wrap Q2FY21: Earnings outperform, post Covid recovery picks up steam - ICICI Direct

Vodafone Idea Positive development beneficial for IDFC first bank - Angel Broking

Lakshmi Vilas Bank - Angel Broking

WIPRO Buyback record date announcement - Angel Broking

TCS buyback record date announcement - Angel Broking

Banks Sector Update - Collection efficiency - a positive surprise! - HDFC Securities

Quant Pick - Max Financial Services - ICICI Direct

Graphite India - Q2FY21 Result Update - ICICI Direct

Gladiator Stocks - Maruti Suzuki India - ICICI Direct

Exide Industries - Q2FY21 Result Update - ICICI Direct

Mishra Dhatu Nigam - Execution outlook remains strong - ICICI Securities

Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2019