IndiGo shares at Rs 3,000? What analysts say on 500 Airbus A320 aircraft deal

Shares of InterGlobe Aviation (IndiGo) gained 3 per cent in Tuesday's trade to hit fresh high after the airline placed an order for 500 Airbus A320 Family aircraft. This, IndiGo said,  will provide it a further steady stream of deliveries between 2030 and 2035.

"This 500 aircraft order is not only IndiGo’s largest order, but also the largest-ever single aircraft purchase by any airline with Airbus. The engine selection for this order will be done in due course and so will be the exact mix of A320 and A321 aircraft," it said.

In a note to clients, ICICI Securities said InterGlobe Aviation’s fleet management has been its absolute bedrock in building a successful cost-efficient airline operation.

The stock rose 2.76 per cent to hit a fresh 52-week high of Rs 2499.95 on BSE.

"This has been further strengthened by IndiGo’s latest order of 500 Airbus A320 family aircraft. The key elements of IndiGo’s successful fleet strategy are: Ordering well in advance to ensure continuous increase in capacity along with benefits of associated cashflow, maintaining low cost structure driven by consistency of uniform and fuel-efficient fleet composition, maintaining operations on single aisle aircraft fleet despite the strategy of increasing international mix to 30 per cent over the next two years and 40 per cent by this decade from 23 per cent in FY23."

ICICI Securities said IndiGo’s consistent approach to aircraft management has given it rich dividend by continuously being able to sustain cycles in terms of lowest cost structure and cash accretion. It maintained a 'Buy' rating on the stock with an unchanged target price of Rs 3,000, based on 25 times FY25E EPS of Rs 120.

"Since the inception of IndiGo, it has ordered a total of 1,330 aircraft from Airbus. The A320NEO Family aircraft would also help IndiGo lower its operating costs and deliver fuel efficiency with high standards of reliability. It would also help with its sustainability goals, with the company already having realized CO2 reduction of 21 per cent in FY16-23," Motilal Oswal Securities said.

IndiGo operates 304 aircraft and has previous orders totalling 480 aircraft which are yet to be delivered between today and the end of this decade.

With this additional firm order of 500 aircraft for 2030-2035, IndiGo’s order-book has almost 1,000 aircraft yet to be delivered well into the next decade. This IndiGo order-book comprises a mix of A320NEO, A321NEO and A321XLR aircraft.

IndiGo said the new order will bring the strategic relationship between IndiGo and Airbus to an unprecedented depth and breadth. With this new order, since its inception in 2006, IndiGo has ordered a massive total of 1,330 aircraft with Airbus.

"IndiGo can maintain operational cost reduction, fuel efficiency, and sustainability goals with the fuel-efficient A320NEO Family aircraft, enabling the fast-growing airline to sustain growth for years to come," said Jinesh Joshi,  Research Analyst at Prabhudas Lilladher.

Technical view

Gaurav Bissa, VP at InCred Equities said IndiGo has witnessed a Symmetrical Triangle pattern breakout on the weekly charts at Rs 2150 level, which catapulted the stock towards the Rs 2,400 level.

"After making fresh lifetime high level, the stock triggered a bearish Harmonic Shark pattern on the weekly chart, which is a reversal pattern in nature. The pattern suggests a fall to Rs 2,150 level once the stock closes below Rs 2,350 level. So far, the stock is trading above its major swing high level, which is keeping the buying interest intact on the counter with multiyear ascending trendline resistance at Rs 2,550 level. At current prices, the risk reward is not suitable for fresh buying and existing traders should book partial profit," Bissa said.

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