Hold InterGlobe Aviation; target of Rs 5236: Prabhudas Lilladher

Prabhudas Lilladher's research report on InterGlobe Aviation

We cut our EBITDAR estimates by 13%/8%/12% for FY26E/FY27E/FY28E and downgrade INDIGO IN to a HOLD (earlier BUY) with a TP of Rs5,236 (earlier Rs6,332) as we fine-tune our ASKM and employee cost assumptions amid implementation of Flight Duty Time Limitation (FDTL) norms. As of FY25, INDIGO IN’s pilots-to-aircraft ratio was 13.8x (excluding AoG) while average salary per pilot was ~Rs6.8mn. Given the shortage of pilots (~1,213 commercial licenses were issued by DGCA in 2024); fresh hiring could prove to be a challenge. This will not only result in employee cost inflation amid demandsupply mismatch but also hinder ASKM growth, if requisite hiring to meet the new norms does not materialize. Overall, we expect employee cost per ASKM of Rs0.51/Rs0.57/Rs0.62 in FY26E/FY27E/FY28E and have cut our ASKM forecast by ~4-12% over the next 3 years.

Outlook

We expect sales/EBITDAR CAGR of 9%/7% over FY25-FY28E and downgrade the stock to HOLD with a TP of Rs 5,236 (10.5x FY27E EBITDAR; earlier 11x) as we believe new FDTL norms pose structural challenge to the cost structure and ASKM growth.