Morgan Stanley maintains an Overweight rating on IndiGo

Global investment banking giant Morgan Stanley has maintained an  ‘overweight’ rating on IndiGo with a target price of ₹1,852 per share.

Key Highlights

• Market share: The brokerage firm said that IndiGo’s market share has increased significantly above pre covid levels of 48%. 
• Industry-wide recovery: Morgan Stanley also said that domestic air traffic recovered in November on the back of festive season demand. Load factor (which essentially measures capacity utilization) improved sequentially for all domestic carriers. 
• Better positioning: The firm also believes IndiGo to be well placed among peers to weather the current downturn and expects it to emerge stronger from the crisis. 

Last week HSBC had downgraded InterGlobe Aviation to 'reduce' from 'hold' on expensive valuation and lack of positive triggers. However, It revised the target price on IndiGo to ₹1490 from ₹1290. Following GOI’s decision to raise the domestic capacity limit from 70% to 80%, HSBC said that the industry should be able to fly this incremental capacity on its average network load factor albeit at lower fares. Given that the costs of this incremental capacity would be limited to fuel, airports, and part of maintenance and salary, it could be profit accretive.