Aviation stocks in focus on Wednesday as jet fuel price cut by 4%; here’s what analysts suggest

Aviation stocks were in focus on Wednesday as the price of jet fuel or Air Turbine Fuel (ATF) was cut by 4 per cent today. Shares of aviation companies that are in operation – InterGlobe Aviation (IndiGo) and SpiceJet – were trading near the flat line after opening in the green today.

Individually, IndiGo shares were up more than 0.5 per cent to touch a day’s high level of Rs 1,866.25 per share and SpiceJet stock hit a day’s high level of Rs 37.63 apiece, up 1 per cent on the BSE today.

Also Read: SpiceJet shares fly as airline announces debt-equity swap with lessor, Rs 2,500-crore fundraise

Conversely, shares of Jet Airways, which is expected to resume its operations soon, were above flatline with a marginal gain on Wednesday. The stock quoted Rs 64 per share at around 01:55 PM.

Amid softening international oil prices, “ATF price was cut by Rs 4,606.50 per kilolitre to Rs 1,07,750.27 per kilolitre,” according to a PTI report.

Fuel prices, including jet fuel, are generally revised on the 1st of every month based on the average rate of international benchmark and foreign exchange rates, by the state-owned oil companies.

Also Watch: IndiGo shares tumble on promoter reducing stake via block deal

In the December quarter of this fiscal, IndiGo reported a steep rise in profit at Rs 1,422.6 crore in the three months ended December 2022, fuelled by robust travel demand. The company in the same quarter of the previous year had a profit of Rs 129.8 crore.

"Third quarter performance was strong both operationally and financially in the backdrop of robust demand for air travel. The wide range of initiatives that were set in motion across the organisation have started to yield results," IndiGo CEO Pieter Elbers said.

Also Read: Indian aviation recovering very strongly; getting into next stage: IndiGo CEO Pieter Elbers

Julius Baer Equity Research gives a ‘buy’ rating on IndiGo with a target price of Rs 2,525 per share.

Similarly, SpiceJet reported a net profit of Rs 110.5 crore for the quarter ended December 2022, up 2.6 times compared with the corresponding period a year ago. While its revenue grew 2.7 per cent on a year-on-year basis to Rs 2,263.4 crore, according to a regulatory filing.

Also Read: SpiceJet Q3 Results: Net profit soars over 2.5 times aided by strong demand; shares fly high

Nuvama Institutional Equities maintains a ‘hold’ rating on SpiceJet with a target of Rs 40 per share.

Factors such as the domestic segment reaching close to full capacity, pick up in international commercial flights, ATF price correction among others likely to aid the aviation sector, going forward, Mitul Shah, an analyst at Reliance Securities said.

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