Buy InterGlobe Aviation; target of Rs 4675: Geojit Financial Services

Geojit Financial Services research report on InterGlobe Aviation

InterGlobe Aviation Ltd. (Indigo) is one of the most efficient low cost air carriers (LCCs) with a market share of 62% in the Indian aviation sector. In Q2FY25, revenue grew by 14% YoY and was healthy despite a seasonally weak quarter, while passenger’s volume grew by modest 6.0% YoY. EBITDA declined by 42.5% YoY, largely due to the effect of seasonality, spike airport fees, and higher lease costs due to grounding of aircraft. Indigo reported a net loss of Rs.989cr, consequent to higher depreciation and interest expenses. The net aircraft addition was 32, taking the total fleet count to 410. We anticipate a recovery in passenger’s growth in Q3 & Q4, supported by a better pricing environment. However, due to grounding of aircraft in the near term, the operational cost is likely to remain elevated. We lower our EPS estimates by 14% & 9.2% for FY25 & FY26E as factor higher cost.

Outlook

Given the promising outlook for the sector, we maintain a positive view on Indigo, supported by its market leadership position (62%), ability to leverage its extensive network, cost-efficient fleet, and robust cash position. Looking ahead, we anticipate that healthy passenger volumes driven by seasonality, stable ticket prices, and a reduction in fuel prices will bolster earnings momentum in FY25E. We value Indigo at a P/E of 21x on FY26E (8.6x EV/EBITDA) and maintain Buy with a target price of Rs.4,675.

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