India is emerging as a key player in the global aviation industry, driven by rising demand for long-haul flights, increased connectivity, and a growing number of tourists traveling abroad. This trend is expected to continue, with Indian carriers seeing faster international traffic growth, strong demand for flights to destinations popular with the Indian diaspora, and a correlation between income and tourism similar to that seen in China.
Interglobe Aviation's Strategic Expansion
Interglobe Aviation, the parent company of IndiGo, has been actively positioning itself to capitalize on this trend. The company has accelerated its expansion into international markets, with the proportion of overseas passengers increasing to 13.5% in the current financial year, up from 7.3% in 2019. Additionally, IndiGo has doubled its number of international destinations to 43 and increased its winter schedule by 14.5%.
Investment Outlook
The company's strategic expansion is further reinforced by its plans to double its order of A350 aircraft to 60, add B787 capacity through damp leases, and develop a maintenance, repair, and overhaul (MRO) facility in Bengaluru. These moves are expected to enhance the company's scale, operating economics, and resilience to foreign exchange fluctuations. As a result, we reiterate a BUY rating for Interglobe Aviation, with a target price of INR6,300, valuing the company at 9x FY28E EBITDA.
Key Highlights
- India is poised to lead global aviation growth due to rising demand for long-haul flights and increased connectivity
- Interglobe Aviation is expanding its international presence, with a focus on long-haul routes and increased capacity
- The company has plans to double its A350 order, add B787 capacity, and develop an MRO facility in Bengaluru
- We reiterate a BUY rating for Interglobe Aviation, with a target price of INR6,300
Remember, this is a perspective, not a prediction. It's essential to do your own research and consider your own risk tolerance before making any investment decisions.