IndiGo the 'best consumption play' for Motilal Oswal, shares near record high on crude cooloff

IndiGo flies high as crude softens, Motilal Oswal upgrades rating

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26 Aug, 2025 12:21

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Shares of leading low-cost carrier InterGlobe Aviation are higher by over 3 percent to near record highs on April 15, following an upgrade by Motilal Oswal to Buy with a target of Rs 6,550 per share, citing a strong domestic recovery, strategic expansion, and favorable cost dynamics as crude prices are projected to stay benign.

In its latest note, the brokerage called IndiGo the ‘best domestic consumption play’, riding on robust domestic air travel demand and international route expansion. The game-changer, however, lies in fuel economics — with Brent crude prices projected to ease to $65 per barrel over FY26-27, thanks to a potential unwinding of OPEC+ supply cuts and a global surplus building up.

“With aviation fuel forming nearly 40% of total costs, this softening of crude significantly supports margin expansion,” Motilal Oswal said.

The brokerage forecasts an EBITDA and PBT CAGR of 28 percent and 38 percent respectively between FY25 and FY27, supported by new aircraft deliveries, expanding codeshare agreements, and a growing cargo business. The exit of GoFirst has also allowed IndiGo to gain market share, further consolidating its dominance.

IndiGo’s international operations is poised to benefit from Donald Trump's remarks on auto tariffs, which are being interpreted as a broader softening stance on global trade dependencies.

For IndiGo, which is aggressively expanding international routes and building its codeshare network, a stable and less challenging trade environment would be key to tapping new markets profitably.

At current levels, the stock trades at 20x FY26 P/E and 9.7x FY26 EV/EBITDA, which Motilal Oswal considers reasonable, given the margin tailwinds and scale advantages. “Consistent profitability post-Covid highlights management’s execution capabilities and strategic clarity,” the note added.

IndiGo recently made history by briefly overtaking global majors like Delta Airlines and Ryanair to become the world’s most valuable airline in terms of market capitalisation.