Neutral Indigo; target of Rs 1030: Motilal Oswal

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26 Aug, 2025 12:21

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Motilal Oswal 's research report on Indigo

INDIGO reported higher yield than est. at INR4.53 (+11.1% YoY) v/s our est. of INR3.7. Yield was stronger on the higher base of last year (a quarter of the Jet demise), aided by fare bands imposed by the Ministry of Civil Aviation (MoCA). However, the company is of the view that fare caps on domestic travel should be removed as early as possible. INDIGO had cash burn of INR400m amid the crisis, which reduced to INR300m as of 30th June – most of the reduction coming out of employee costs. The company has undertaken cost-reduction initiatives for leasing, payroll, and other costs. Considering the above-mentioned efforts are realized and cash burn per quarter decreases along with increase in capacity utilization (ASK guidance for 2Q/3QFY21 is at 40%/50-70% of previous year's respective quarters), we have built-in loss of INR62.7b in FY21, with breakeven expected in 2QFY22.

Outlook

The stock trades at 14.1x FY22 EPS of INR64.4 and 4.2x FY22 adj. EV/EBITDAR. We value the company at 16x FY22 EPS of INR66.4 to arrive at TP of INR1,030. Maintain Neutral.

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