Neutral InterGlobe Aviation; target of Rs 2800: Motilal Oswal

Neutral

Motilal Oswal's research report on InterGlobe Aviation

InterGlobe Aviation (IndiGo) posted a PAT of INR1.9b (v/s our estimated net loss of INR9.6b) in 2QFY24 driven by lower-than-expected fuel costs and supplementary rentals. Revenue passenger kilometers (RPK) were at 29.4b. Passenger load factor (PLF) was at 83.3% with available seat kilometers (ASK) of 35.3b (est. of 34.3b) and yield of INR4.4 (v/s est. of INR4.3) in 2QFY24. Supplemental rentals were down QoQ due to provisions of a reversal of ~INR1.5b taken by the company during 2QFY24. Rentals are likely to rebound to 1QFY24 levels from 3Q onwards. Currently, over 40 aircraft of IndiGo are grounded due to P&W engine issues. P&W has now identified a new issue with powder metal, and an incremental number of engines will be removed for inspections from Jan’24 onwards, thereby hurting operating fleet further.

Outlook

While we remain positive on the industry as a whole, IndiGo would have to navigate through various challenges in the near to medium term. Reiterate Neutral with a TP of INR2,800 (premised on 7.5x FY25E EV/EBIDTAR).

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InterGlobe Aviation - 05 - 10-2023 - moti