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  1. Buy good stocks like IndiGo when analysts say ‘sell’, says this fund manager; bets on India aviation

Buy good stocks like IndiGo when analysts say ‘sell’, says this fund manager; bets on India aviation

Following tepid Q4 results of IndiGo, even as various brokerages cut target price on the shares, N Jayakumar of Prime Securities loves aviation stocks as its still a young, vibrant industry growing at a sustainable rate of 15-16% and pricing power is also coming back.

By: | Published: May 4, 2018 10:59 AM
“So there is a consensus sell call today. This is exactly the time that good individual stocks should be sought out,” Jayakumar said.

Following tepid Q4 results of IndiGo, even as various brokerages cut target price on the shares, N Jayakumar of Prime Securities loves aviation stocks as its still a young, vibrant industry growing at a sustainable rate of 15-16% and pricing power is also coming back. Taking stock of a plethora of sell calls on the shares, N Jayakumar told ET Now, “So there is a consensus sell call today. This is exactly the time that good individual stocks should be sought out. I am not making a recommendation. In order to get into aviation space, wait for this mass consensus sell calls. Those are the days when you need to make your entry.”

Notably, various brokerages including Citi has downgraded the stock to “sell” from “buy”, citing impacts of rising cost pressures and weak pricing power, while Morgan Stanley retained “equal-weight.” IDFC has also downgraded the shares to neutral with a target price of Rs 1,293.

According to Jayakumar, a portfolio can include all the three aviation stocks. “The Indian aviation space is well served by the Indian diaspora and to that extent, travel whether to India or out of India has grown dramatically. So a portfolio can include all the three players,” he told the channel.

Sharing reasons for his bullishness in the space, N Jayakumar said that aviation is one of  consumer-facing nascent industries which are likely to grow in multiples. “Of course, some companies are priced to perfection, others are not and that is where you need to be discerning,” he added. IndiGo shares were trading at Rs 1,195, down by nearly 1% this morning. Meanwhile, Jet Airways shares were trading 1% higher at Rs 524.9. Spicejet shares too were trading 1% higher at Rs 125 this morning.

According to the expert, sometimes, a plunge in the shares after weak quarterly results can provide good entry points. “ If in one quarter, a single company result can take you down by 20% or 25% where else do you get good entry points? I want to make a disclosure; I do not hold Indigo but I own stocks in the space and I do not want to talk about specific stocks and I love the space,” he said. IndiGo shares have reported a 73 percent drop in net profit to Rs 117.6 crore as compared with the same quarter last year. This compares with Rs 478 crore consensus estimate of analysts tracked by Bloomberg.

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