We maintain our constructive view on IndiGo. The key premise has been that a structurally lower supply industry situation in the medium term is a bigger investment thesis, despite any short-term possible demand blip. The same has also been ratified from an impressive yield showing in H1FY26 and a steady guidance for Q3. Spreads are expected to get a boost from steady crude price, partially offset by management’s guidance of low-single-digit growth in CASK ex-fuel (earlier was flat). We back the prospects of yield to remain steady, which should be able to offset cost escalations while better volume growth could lead to further market share gain by IndiGo. Capacity management through lower deployment in Q2 and higher in Q3/Q4 is also supporting FY26 EPS. We believe that benefits of active capacity management remain underappreciated by investors.
OutlookWe maintain BUY with an unchanged target price of INR 6,680 (unchanged), based on 28x FY27E EPS of INR 239 (post full tax).
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