Despite the best ever quarterly net profit of Rs 3,091 crore during April-June of financial year 2023-24 (Q1FY24), challenges are mounting for InterGlobe Aviation-run IndiGo in the near term, said analysts.
Given this, most brokerages have retained their ratings from buy to underperform , as well as their target price for the stock.
For instance, Motilal Oswal Financial Services has retained its neutral rating on the scrip as it believes the low-cost airline is facing teething issues at present.
InterGlobe Aviation-run IndiGo airline on Thursday reported a consolidated net loss of Rs 620.1 crore for the October-December quarter of FY21 (Q3FY21), as against a net profit of Rs 490.5 crore in the year-ago period. The airline, however, narrowed its loss from Rs 1,194.8 crore incurred in the September quarter of FY21. The high level of consumer confidence in our product has indeed been heartening and we are glad to be making graduated and measured steps to a full recovery. We look forward to a gradual opening up of international scheduled flights during the next few months because increased capacity and aircraft utilization are so very critical for our return to profitability,” said Ronojoy Dutta, chief executive officer of the airline.
A troika of festive travel, low fuel costs, and rupee appreciation may help IndiGo and SpiceJet to narrow their losses during the December quarter of FY21, say analysts. The recovery in earnings, however, may be capped by weak air fares, and stricter travel restrictions amid a new strain in coronavirus (Covid-19). While most analysts remain divided on the quantum of loss incurred by domestic airlines during the quarter, they unanimously agree that the Indian aviation sector is on a slow but steady path to recovery. “Average daily domestic passengers increased by almost 120 per cent from Q2FY21 to Q3FY21, partly due to seasonality factor. Yet, average daily passengers in December recovered to only 55 per cent versus last year despite the low fare environment,” noted analysts at global brokerage HSBC.