Indigo in rough weather

InterGlobe Aviation or Indigo slipped almost 4% to Rs.1181.10 and continues to remain firmly in the red; it is the second top loser on the BSE.

The 73% drop in Indigo’s net profit for Q4FY18 on account of higher fuel costs and other expenses continues to haunt the company.

Spooked by this performance, the likes of Credit Suisse, Kotak Securities, HSBC, SBI Caps, IDFC Securities, and Morgan Stanley had cut their target price, voicing concern that it might not be able to keep its costs down as it is replacing its sale and lease-back model for aircraft financing with outright purchase of aircraft instead. And fuel prices have only gone up further after the end of Q4FY18 so that concern will remain.

Citi has in fact put out a report today, maintaining its ‘sell’ and cut the target price from Rs.1240 to Rs.1070.

In its report, Citi has stated that higher fuel prices will only be partially offset by higher yields and Q1FY19 margins could show pressure. There has also been a slowdown in the pace of air traffic growth and that too might reflect in the numbers.