Rising crude oil prices may prevent IndiGo stocks from flying; should you buy? Check share price target

By: | Published: May 21, 2018 12:25 PM

With global crude prices on the boil soaring to near $80 per barrel, India’s largest airline by market share, IndiGo airlines is seen to be impacted if oil prices stay at current levels or even depreciate further.

IndiGo share price target.For the latest quarter, InterGlobe Aviation has reported 73.30 per cent yearly drop in profit at Rs 117.64 crore for March quarter.

With global crude prices on the boil soaring to near $80 per barrel, India’s largest airline by market share, IndiGo airlines is seen to be impacted if oil prices stay at current levels or even depreciate further. According to CITI, Interglobe Aviation-run IndiGo airlines may see its yields and margins get impacted if oil prices continue to soar. Interglobe Aviation shares were trading 4% down at Rs 1,094 on Monday. According to the research firm, April’s market share for the company has has risen marginally, even though there has been an on-year fall.

For the latest quarter, InterGlobe Aviation has reported 73.30 per cent yearly drop in profit at Rs 117.64 crore for March quarter. In the comparable quarter last fiscal, IndiGo had reported a net profit of Rs 440.30 crore. Notably, company President Aditya Ghosh also stepped down in April this year. Revenue for the quarter under review rose nearly 20%  on-year to Rs 5,799.11 crore. The margin for the quarter fell to 2 per cent from 9.1 per cent in the year-ago quarter. Brokerage firm CITI remains buoyant on demand but not on profits. The firm has maintained a ‘sell’ rating on the shares with a target price of Rs 1,240.

The tepid Q4 results of IndiGo has led to various brokerages cut target price on the shares, but N Jayakumar of Prime Securities is bullish on 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,” he told the channel. While Morgan Stanley retained “equal-weigh,”  on the shares IDFC has also downgraded the shares to neutral with a target price of Rs 1,293.

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