However, Citi has maintained its “buy” rating on the stock and has reduced its target to ₹5,100 per share from ₹5,700 apiece. The revised price target implies an upside potential of 17% from its previous closing price.
Citi said IndiGo Airlines has been impacted by a clutch of negative developments over the last 12 months.
While the adverse geopolitical landscape marred the first quarter, the flight duty time limitation (FDTL) norms, which resulted in multiple flight cancellations, affected the third quarter results.
Just as operations were normalising, the geopolitical environment has turned uncertain yet again with the start of the Iran-Israel-US war, the Citi note stated.
IndiGo’s international flights have been affected. The sharp increase in fuel prices and the depreciating rupee could impact the airline’s profitability, Citi said.
That said, the airline’s claw-back in the domestic market share in January is commendable, Citi said. IndiGo’s market share expanded to 63.6% in January from 59.6% in the previous month, reversing its earlier decline. Meanwhile, the Air India Group’s market share declined to 26.5% from 29.6% in the same period.
The analyst added that IndiGo’s cost structure is relatively better compared to its peers.
Citi said it has trimmed IndiGo’s target enterprise value / sales multiple to 2.4 times from 2.6 times to reflect the growing uncertainty on international routes.
Of the 27 analysts who have coverage on the stock, 22 have ‘buy’ ratings, three have ‘hold’ ratings and two have ‘sell’ ratings.
IndiGo shares declined 3.6% to hit an intraday low of ₹4,194.1 apiece on Thursday. The stock was down 2.1% at ₹4,260.6 apiece at 12.15 pm. It has declined 14.5% in the past month.
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