Two investment banks initiated coverage of Air Astana (LSE:AIRA) with ‘buy’ ratings after the airline's floated in London last month.
Jefferies and Citi both highlighted the airline's unique position to capitalise on the Central Asian travel market, where it enjoys favourable market dynamics.
Jefferies set a price target of $11.20, citing Air Astana (LSE:AIRA)'s potential to drive travel penetration in Central Asia through its low-cost carrier FlyArystan, a strong fleet expansion strategy, and a sustainable cost advantage over its peers.
Citi's target price was $11.
"We believe the company is in a favorable market dynamic in the domestic & international traffic coupled with competitive cost position," the US bank said, with its "deep dive" into the local market finding that 63% of its routes have a dominant market share of at least 75%.
According to Jefferies, Kazakhstan's robust GDP growth forecasts, coupled with demographic tailwinds, also support a favourable outlook.
The firm expects Air Astana to deliver an EBITDA compound annual growth rate of 13% and free cash flow growth of 12% over the 2023-2028 period.
The note pointed out on the airline's "asset-light fleet expansion" plans to increase its fleet from 49 aircraft to 80 by 2028, primarily consisting of Airbus models.
This strategy, according to Jefferies, enables Air Astana to access new aircraft without the financial burden of outright purchases, thereby facilitating quicker fleet growth.
“We apply a 3.2x EV/EBITDA multiple Air Astana, in-line with its European and Turkish airline peer group. This implies 27% upside potential to today's share price,” said analysts.