Accumulate InterGlobe Aviation; target of Rs 4958: Prabhudas Lilladher

Prabhudas Lilladher's research report on InterGlobe Aviation

IndiGo reported better than expected performance with FX adjusted EBITDAR beat of 20% led by compensation benefit received from P&W arising from Aircraft on Ground (AoG) issue. Other operating income (compensation benefit is captured here) was up 2.6x/9.4x on QoQ/YoY basis due to accrual of catch-up component and is expected to normalize in future. Despite a strong performance, our EBITDAR estimates are broadly intact for the next 2 years as revise our fuel CASK assumptions due to 1) rise in VAT rates in few states and 2) induction of less fuel efficient CEO aircrafts via damp lease. IndiGo has charted a growth strategy to deepen international penetration by placing a firm order of Airbus A350-900 sometime back and is taking steps towards premiumization with plans to launch a business class product soon.

Outlook

We expect revenue CAGR of 16.0% for next 2 years with EBITDAR margin of 25.2%/22.7% in FY25E/FY26E. Retain ‘ACCUMULATE’ with a TP of Rs4,958 (earlier Rs4,667) by assigning EV/EBITDA multiple of 10x (earlier 9.5x).

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