IndiGo shares to soar higher? A 35% upside projects a ₹5,700 target

IndiGo shares to soar higher? A 35% upside projects a ₹5,700 target

After a nearly 42% gain since the beginning of the year, shares of Interglobe Aviation Ltd., which operates the low-cost airline IndiGO, are expected to rally another 35%, according to analysts at brokerage firms.

Global brokerage firm UBS has a 'Buy' recommendation on Interglobe Aviation, with a revised price target of ₹5,400 from ₹4,000 per share earlier.

According to UBS's quantitative regression model, Indian air travel is expected to experience double-digit growth.

The foreign brokerage said that Indigo's market share gains in international travel will continue, further aided by A321 XLRs and A350s in medium to long term.

UBS expects Indigo to deliver a 13% compound annual growth rate (CAGR) in EBITDA from the financial year 2024 to financial year 2027, with potential for upside risks.

However, a short-term profit impact on sudden significant rise in supply, seasonality or sharp fuel price increases cannot be ruled out, the brokerage noted.

According to UBS, Indigo's yields and profitability during the first quarter of FY25 may be impacted considering the sharp rise in Air India and Vistara's near-term capacity. Additionally, the second quarter is anticipated to be weaker due to seasonal factors.

Domestic broking house Kotak Institutional Equities also has a 'Buy' rating on IndiGo, with a target price of ₹5,700 per share.

Kotak mentioned that passengers' ability to pay and airline losses will lead to a gradual increase in airfares over time. The willingness of air passengers to pay higher fares may be tested in the near term, potentially impacting near-term load factors and pricing strategies of airlines, it said.

Further, Kotak said that IndiGo currently is the only profitable airline and is well-positioned to benefit from an uptick in airfares over time.

Shares of Interglobe Aviation Ltd. opened a percent higher at ₹4,276 apiece on the NSE today. The stock has risen over 60% over the last 12 months.