Buy IndiGo on dips: Analysts
InterGlobe Aviation, the parent company of IndiGo, ended 0.6 per cent lower at ~1,400 levels on the NSE, reacting to the news of its president, Aditya Ghosh, unexpectedly quitting the company in post market hours on Friday. By comparison, the Nifty50 index gained 0.4 per cent to 10,739 levels.
Analysts say the fall was a knee-jerk reaction to the news. Surprisingly the stock, as if anticipating the move, had lost over 6 per cent in trade ahead of the announcement on Friday.
“The change in management will have a limited impact on the stock. The naming of a successor will lend some stability,” said A K Prabhakar, head of research at IDBI Capital.
Over the past year, InterGlobe Aviation has outperformed its peers and rallied nearly 27 per cent as compared to 20 per cent rise in Jet Airways and a 15 per cent up move in the Nifty50. Thus far in 2018, it has outrun its peers by rallying around 17 per cent, as compared to 25 per cent fall in Jet Airways. During this period, the Nifty50 rose around 1.5 per cent. Analysts say IndiGo has been benefiting from a steady increase in its market share in a competitive industry and rise in domestic traffic.
According to a Motilal Oswal Research report, passenger growth in the aviation sector has been in double digits for the past 44 months. Domestic air passengers grew 28.2 per cent yearon-year (y-o-y) to 11.5 million in March 2018 and 24 per cent y-oy in the January–March quarter of 2017-18, the report said. The airline’s passenger market share stood at 39.6 per cent in March and 39.8 per cent in the fourth quarter, compared to 39.6 per cent in the previous quarter, the report said. Gaurang Shah, head investment strategist at Geojit Financial Services, said one individual exit would not have any material impact on the firm.
“We remain positive on the stock and suggest investors buy on a decline from a long-term perspective,” he added.
“The road ahead for aviation stocks depends on how crude oil prices play out. If they remain above $75 a barrel (average for one quarter), the financial performance of all airlines will come under pressure. Investors can buy if the stock corrects around 10 per cent from the current levels,” Prabhakar said.