IndiGo, SpiceJet Shares Hit Lower Circuit. Here’s What Brokerages Have To Say

Aviation stocks hit the lower circuit, tracking the benchmark indices, as Indians cut down on their travel plans amid the novel coronavirus outbreak.

Shares of InterGlobe Aviation Ltd. and SpiceJet Ltd.—the nation’s only two listed airlines—tumbled 10 percent and 20 percent, respectively, today. This comes in a bear market where India’s equity indices have slumped 20 percent since their January peak, joining the global peers in their worst selloff since 2008 crisis, as the spreading virus threatens to stall economic growth.

Besides, the operator of India’s largest airline issued a profit warning guiding that its earnings for the ongoing quarter will be significantly impacted due to coronavirus-led disruption. Daily bookings are down 15-20 percent week-on-week over the past few days, IndiGo’s parent said in an exchange filing. January and February saw a modest impact from coronavirus as planes were redeployed in other markets, it said.

Here’s what brokerages have to say:

Citi on IndiGo

• Expects stock to remain under pressure after this profit-warning.
• Maintains ‘neutral’ with a target price of Rs 1,570 apiece.
• Coronavirus-related slowdown to impact fourth-quarter earnings.
• 15-20 percent decline in demand could mean 5-7 percent impact on revenue and 15-20 percent impact on earnings before interest, tax, depreciation, amortisation and rental.
• This is a transient phase and long-term demand is intact.

HSBC on IndiGo

• Maintains ‘hold’ but cuts target price to Rs 1,145 apiece from Rs 1,195.
• Profit-warning validates the brokerage’s concerns.
• Weak demand in summer could have significant impact on its full-year profitability.
• Cuts FY20 net profit forecast by 38 percent to factor in mark-to-market forex loss.

Credit Suisse on IndiGo

• Maintains ‘outperform’ with a target price of Rs 1,850 apiece.
• Maintains ‘outperform’ on good execution, strong balance sheet, cash flows, cost structure and big long-term opportunity.
• Domestic yields have also come under significant pressure.
• Very sharp fall in three days on Indian travelers' reaction to Covid-19 outbreak.
• International flight cancellations now turning severe.