IndiGo operator gains 2% on LEAP-1A engines order; Credit Suisse raises the target

Credit Suisse maintains outperform call on the stock and raised price target to Rs 1,900 from Rs 1,800 after upgrading earnings growth estimates to 16 / 18 percent for FY20/21.

Credit Suisse maintains outperform call on the stock and raised price target to Rs 1,900 from Rs 1,800 after upgrading earnings growth estimates to 16 / 18 percent for FY20/21.

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IndiGo operator InterGlobe Aviation shares gained 2 percent intraday on June 18 after the company placed orders worth $20 billion for LEAP-1A engines.

The stock was one of the biggest gainers in the last nine months, rising 87 percent amid stable crude oil prices and gaining market share from Jet Airways. The scrip was quoting at Rs 1,660, up Rs 19.65, or 1.20 percent on the BSE at 09:16 hours IST.

IndiGo, on June 17, said it has ordered CFM International LEAP-1A engines to power 280 Airbus A320neo and A321neo aircraft.

The contract, which includes spare engines and an overhaul support agreement, is valued at more than $20 billion at list price, it added.

The company said in order to support its new LEAP-1A fleet, IndiGo also signed a long-term Service Agreement.

IndiGo has been a CFM customer since 2016 and currently operates a fleet of 17 A320ceo aircraft powered by CFM56-5B engines as part of a total fleet of 215 A320/A321 family aircraft.

Delivery of the first LEAP-1A-powered A320neo is scheduled in 2020, the IndiGo operator said.

Riyaz Peermohamed, Chief Aircraft Acquisition and Financing Officer of IndiGo said, “The CFM LEAP engine will allow IndiGo to maintain its strong focus on lowering operating costs and delivering fuel efficiency with high standards of reliability. This new partnership will allow IndiGo to continue to provide affordable fares to its customers.”

In addition, global brokerage house Credit Suisse maintains outperform call on the stock and raised price target to Rs 1,900 from Rs 1,800 after upgrading earnings growth estimates to 16/18 percent for FY20/21.

“We are positive on the company’s positioning, sector & modest competition. Yields in Q2 would still be better YoY,”

Company is aiming to scale up its international business in FY20, it added. “We will watch out for execution as both international yield & cost structure are lower. Yield variations are tend to be much larger versus variance among domestic routes.”

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