Kotak Securities Picks This Large Cap Airlines Stock, Recommends Buy For Robust Returns

Kotak Securities has a "buy" call on InterGlobe Aviation Ltd. (INDIGO) stock with a target price of Rs 2,400/share. According to the brokerage's target price, the stock can rise 18% from its current level. It is a large cap Airline Sector company having a market capitalisation of Rs 77,765.59 crore. Indigo is India's largest passenger airline operating as a low-cost carrier. Serving 86 destinations including 24 international destinations, it provides passengers with a simple, unbundled product, fulfilling its singular brand promise of providing "low fares, on-time flights, and a courteous and hassle-free service" to its customers.

Stock Outlook & Returns

The current market price (CMP) of the stock is Rs 2,042/share on NSE. Its 52-week low level is Rs 1,511.75/share and its 52-week high is Rs 2,282.10/share, respectively. In the past 1 month, the stock fell, giving 5.52% negative return. Whereas in the past 3 months, it surged 10.95%. It moved up by 0.9%. In the past 3 and 5 years, it has given 50.67% and 67.23% positive returns, respectively.

Rationale

According to the brokerage, "Our recent interaction with management highlights customers willingness to spend & limited impact that recent new airlines have had on its business. Tata Group may impact INDIGO's market share in top metro routes, not pricing. We note upside risks to our unchanged RASK-CASK assumptions for FY23/24. We note an upside risk to our unchanged FV from higher-than-expected yields."

Company Updates

Positive

Improved its brand equity among customers, thus sustaining its high market share. "We estimate ~Rs0.3/0.4 per ASK of RASK less CASK for FY24/25. We estimate FY25E EPS (earning per share) of ~Rs150/share. Indigo expects good time for pricing to continue until the capacity (aircraft, airport slots) remains a scarce resource; this could continue through FY2024, in our view," the brokerage has said.

Negative

INDIGO's overall domestic market share will slide down closer to 50% from the current 55%+ level.

Disclaimer

The stock has been picked from the brokerage report of Kotak Securities. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.