Neutral InterGlobe Aviation; target of Rs 2135: Motilal Oswal

Motilal Oswal recommended Neutral rating on InterGlobe Aviation with a target price of Rs 2135 in its research report dated May 19, 2023.

Broker Research

May 23, 2023 / 11:48 IST

Neutral

Motilal Oswal's research report on InterGlobe Aviation

INDIGO reported a PAT of INR9.2b, lower than our expectation, on account of higher-than-expected fuel and employee costs. Revenue passenger kilometers (RPK) came in at 25.6b. Passenger load factor (PLF) was higher at 84.2%, with available seat kilometers (ASK) of 30.4b (est. 29.6b) and the yield at INR4.9 (est. INR5.4) in 4QFY23. The yield was lower QoQ due to seasonality, while capacity growth stood at 19% in FY23 as the company targets growth in the mid-teens range in FY24. The management does not expect lease costs to increase substantially, but there could be a marginal increase due to rising interest costs. That said, according to our airfare tracker, the 30-day domestic forward prices are up by 12% QoQ in 1QFY24 till date and the 15-day prices are up by 20% QoQ in 1QFY24 till date. The total number of domestic passengers has also crossed pre-Covid levels in Jan-Apr’23, which suggests strong travel trends in the domestic aviation market.

Outlook

We increase our revenue estimates by 12%/17% for FY24/FY25 because of the strong pricing trend being seen in ticketing revenue. We keep other estimates largely unchanged. The stock continues to trade above its preCovid levels. We reiterate our Neutral rating on the stock with a TP of INR2,135 at 7.5x FY25E EV/EBIDTAR.

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