iconiifl-logo-icon 1
IIFL

Invest wise with Expert advice

By continuing, I accept the T&C and agree to receive communication on Whatsapp

  • Open Demat with exclusive Advice & Services
  • Get a dedicated Relationship Manager to help you grow your wealth
  • Exclusive advisory on 20+ trading & wealth-based investment options
  • One tap Investments, Automated trading & much more
  • Minimum 1 lakh margin required
sidebar image

InterGlobe Aviation: Volumes strong in seasonally weak quarter

17 Mar 2023 , 11:23 AM

Recommendation: Buy

Target Price: Rs 2,680

 

While the Street has been concerned post the large 470-aircraft order by Air India, bulk of the deliveries would arrive from mid-2025. The sharp decline in Crude means that carriers can lower yields by 7% versus Q3FY23 and still maintain profitability.

Current passenger traffic gives confidence for 15% industry volume growth in FY24

Domestic passenger traffic is averaging about 420k per day in February-March 2023. This is much higher than the average of 390k passengers in the seasonally strong October-December 2022. Industry-level load factor is holding up above 85% in Q4FY23, which is only slightly lower than 86.6% in the seasonally strong Q3FY23. IIFL Securities’ FY24 industry volume forecast is 155 million (15% growth over FY23). Current daily volumes (420k) are almost at the same level as the daily volumes implied by IIFL Securities’ FY24 forecast (423k).

Fears of competitive intensity overdone

Since the announcement of the 470-aircraft order by Air India in mid-February 2023, there have been fears on Street regarding increasing competition. These concerns are overdone, at least from a 2-year perspective. The first of the ordered new aircraft will enter service in late-2023, while the bulk of deliveries would arrive from mid-2025 onwards (more than two years out). In the interim, strong demand growth would ensure that upcoming deliveries (at the industry level) are well-absorbed. Analysts at IIFL Securities estimate net deliveries at the industry-level to be 50-70 aircraft per annum over FY24/FY25, which is unlikely to create a supply glut when seen in the light of existing industry strength of 700 aircraft and a potential 15% growth in passenger traffic.

Sharp fall in Crude leaves room for moderation in yield

Current crude price is 18% lower than the average in the preceding quarter (Q3FY23). Fuel being about 40% of revenue, it implies that carriers can cut fares by 7% (to support volumes), without impacting per unit profitability. Although analysts at IIFL Securities have cut their Crude assumption from USD 95 to USD 85, the same has been offset by a lower yield assumption (FY24 4% below FY25), As a result, their FY24/FY25 earnings assumptions are unchanged.

Related Tags

  • Indigo
  • interglobe aviation
sidebar mobile

BLOGS AND PERSONAL FINANCE

Images
29 Mar 2024   |   10:14 AM
Images
28 Mar 2024   |   03:36 PM
Images
28 Mar 2024   |   03:01 PM
Images
28 Mar 2024   |   01:21 PM
Read More
Knowledge Centerplus
Logo

Logo IIFL Customer Care Number
(Gold/NCD/NBFC/Insurance/NPS)
1860-267-3000 / 7039-050-000

Logo IIFL Securities Support WhatsApp Number
+91 9892691696

Download The App Now

appapp
Knowledge Centerplus

Follow us on

facebooktwitterrssyoutubeinstagramlinkedin

2024, IIFL Securities Ltd. All Rights Reserved

ATTENTION INVESTORS
  • Prevent Unauthorized Transactions in your demat / trading account Update your Mobile Number/ email Id with your stock broker / Depository Participant. Receive information of your transactions directly from Exchanges on your mobile / email at the end of day and alerts on your registered mobile for all debits and other important transactions in your demat account directly from NSDL/ CDSL on the same day." - Issued in the interest of investors.
  • KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary.
  • No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor's account."

www.indiainfoline.com is part of the IIFL Group, a leading financial services player and a diversified NBFC. The site provides comprehensive and real time information on Indian corporates, sectors, financial markets and economy. On the site we feature industry and political leaders, entrepreneurs, and trend setters. The research, personal finance and market tutorial sections are widely followed by students, academia, corporates and investors among others.

RISK DISCLOSURE ON DERIVATIVES
  • 9 out of 10 individual traders in equity Futures and Options Segment, incurred net losses.
  • On an average, loss makers registered net trading loss close to Rs. 50,000.
  • Over and above the net trading losses incurred, loss makers expended an additional 28% of net trading losses as transaction costs.
  • Those making net trading profits, incurred between 15% to 50% of such profits as transaction cost.
Copyright © IIFL Securities Ltd. All rights Reserved.

Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248

plus
We are ISO 27001:2013 Certified.

This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.