Shares of Interglobe Aviation and SpiceJet ended higher on Tuesday after both companies registered stellar growth in passenger traffic in May amid holiday peak season and Jet Airways fiasco. The overall passenger growth in the aviation sector stood at 12 million in May, up 2.8 per cent year-on-year, according to a report by Prabhudas Lilladher. Shares of both the companies- Interglobe Aviation, an operating company of IndiGo and SpiceJet surged more than 5 per cent to finally end at Rs 1445.90 per share and Rs 131.75 per share respectively on Tuesday.
“Aided by ~25 aircraft inductions over April-May, SpiceJet reported domestic Pax/ASK growth of 24%/32% YoY while its market share improved ~170bps MoM to a 5-year high of 14.8%. IndiGo inducted ~15 aircraft over April-May which enabled domestic Pax/ASK growth of 23%/26% YoY while enjoying a market share of 49.2%,” said Prabhudas Lilladher.
The brokerage house expects IndiGo and SpiceJet to sustain margin expansion and improved profitability in view of the current environment of high yield, strong PLFs (passenger load factor) ensuing from Jet’s downfall and favourable air turbine fuel or ATF prices. However, Prabhudas Lilladher cautioned against ongoing promoters’ feud at IndiGo which may impact the growth rates and stock valuation in case of any adverse regulatory outcome. The brokerage firm has retained BUY on IndiGo and SpiceJet with a target price of Rs1,948 per share and Rs 211 per share respectively.
Both IndiGo and SpiceJet are expected to record a rise of 13% and 5% in airfares respectively on a year-on-year basis in the first quarter of FY20, ICICI Securities said. The Apr-Jun quarter is expected to have been a strong quarter for InterGlobe Aviation (IndiGo) and SpiceJet owing to better yields. Average INR value was sequentially flat and average ATF prices declined 1% on a year-on-year basis, it added. The Apr-Jun quarter of FY20 is expected to have been a strong quarter for InterGlobe Aviation (IndiGo) and SpiceJet on the back of better yields. “Average INR value was sequentially flat and average ATF prices declined 1% on a YoY basis. We factor-in the strong fare hikes taken during the quarter in the wake of the capacity crunch resulting from the grounding of Jet/MAX,” it noted in its report.