According to Morgan Stanley, IndiGo’s low-cost business model and bulk orders for planes give it one of the lowest cost per available seat kilometre (CASK) among global airlines.
Shares of InterGlobe Aviation jumped 3 percent intraday on Thursday, extending its rally. The owner of low-budget airline company has been quite favoured by analysts and investors as it has given around 61 percent returns in about a month time of listing on November 10. It touched record high at Rs 1234 per share on December 16. Now, Morgan Stanley has initiated coverage on IndiGo owner company with a equalweight rating. It expects IndiGo to post strong earnings growth in near-term stating that it is among the world's best run airlines and crude oil prices at a seven-year low to give additional boost. According to Morgan Stanley, IndiGo’s low-cost business model and bulk orders for planes give it one of the lowest cost per available seat kilometre (CASK) among global airlines. However, it says that the company's exposure to volatility in crude oil prices and exchange rate movements are risky. Also aggressive pricing strategies by peers pose a threat to the competitiveness. “We estimate low oil prices, strong demand growth and weak competition will propel the EBITDAR margin for IndiGo to an all-time high of 36.4 percent in FY16. However, we expect earnings momentum to moderate in subsequent years as the industry ex Indigo adds capacity. Margins are likely to trend lower, and we estimate a 33 percent EBITDAR margin in FY18,” Morgan Stanley adds. At 11:58 hrs Interglobe Aviation was quoting at Rs 1,213.25, up Rs 22.75, or 1.91 percent on the BSE.
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Shares of InterGlobe Aviation jumped 3 percent intraday on Thursday, extending its rally. The owner of low-budget airline company has been quite favoured by analysts and investors as it has given around 61 percent returns in about a month time of listing on November 10. It touched record high at Rs 1234 per share on December 16. Now, Morgan Stanley has initiated coverage on IndiGo owner company with a equalweight rating. It expects IndiGo to post strong earnings growth in near-term stating that it is among the world's best run airlines and crude oil prices at a seven-year low to give additional boost. According to Morgan Stanley, IndiGo’s low-cost business model and bulk orders for planes give it one of the lowest cost per available seat kilometre (CASK) among global airlines. However, it says that the company's exposure to volatility in crude oil prices and exchange rate movements are risky. Also aggressive pricing strategies by peers pose a threat to the competitiveness. “We estimate low oil prices, strong demand growth and weak competition will propel the EBITDAR margin for IndiGo to an all-time high of 36.4 percent in FY16. However, we expect earnings momentum to moderate in subsequent years as the industry ex Indigo adds capacity. Margins are likely to trend lower, and we estimate a 33 percent EBITDAR margin in FY18,” Morgan Stanley adds. At 11:58 hrs Interglobe Aviation was quoting at Rs 1,213.25, up Rs 22.75, or 1.91 percent on the BSE.
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