Broker’s Call: Indigo (Buy)

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Target: ₹2,855

CMP: ₹2,513

InterGlobe Aviation (IndiGo) reported a record quarter with all time high Revenue/PAT of ₹16,680 crore/₹3,090 crore respectively aided by strong load factor of 88.7 per cent (Prabhudas Lilladher expectations (PLe) of 88 per cent) and yield of ₹5.1 (PLe ₹4.9) coupled with 26.6 per cent YoY decline in fuel CASK to ₹1.6 (PLe ₹1.7) amid fall in crude prices.

We believe IndiGo is well placed to strongly benefit from capacity deployment (north of mid-teens capacity guidance remains intact for FY24, despite escalation in engine issues at P&W); network expansion in domestic as well as international markets; and superior balance sheet (₹15,700 crore of free cash).

Despite a record quarter, we cut our EBITDAR estimates by about 7 per cent each for FY24/FY25E as yields are witnessing higher pressure on sequential basis (as compared to past) while ATF prices have increased by about 11 per cent in last 2 months. We expect revenue CAGR of 15 per cent over next 2 years with EBITDAR margin of 25.4/28.1 per cent in FY24/FY25. Retain ‘Buy’ with a TP of ₹2,855 (EV/EBITDAR multiple of 7x Dec-24E; no change in target multiple)