Interglobe Aviation Gets 'Buy' Upgrade From Motilal Oswal, Sees 27% Upside — Here's Why

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Motilal Oswal Report

We upgrade Interglobe Aviation Ltd. to Buy as we believe that benign Brent crude prices amid the ongoing geopolitical turmoil and favorable domestic demand bode well for the company. We assign a target price of Rs 6,550 premised on 10 times FY27E EV/Ebitdar. The stock currently trades at a P/E of 20x FY26 EPS and 9.7x FY26E EV/Ebitda. We estimate a CAGR of 28%/38% in Ebitda/PAT during FY25-27E.

We lowered our Brent assumption for FY26-27E to $65/bbl (from $70/bbl), based on the following factors:

1. there is going to be a gradual unwinding of OPEC+ voluntary cuts from Apr’25 and

2. IEA projects that global supply is likely to exceed demand and the demand-supply gap is set to widen as voluntary cuts unwind from Apr’25.

For IndiGo, aircraft fuel accounts for ~40% of total expenses; therefore, softer crude prices bode well for the company.

IndiGo has been on an upward trajectory after Covid – gaining market share in the domestic market (aided by the insolvency of GoFirst in May’23), expanding its international and cargo business, adding new destinations/routes, signing codeshare agreements, and procuring delivery of aircraft from OEMs. These factors have helped the company maintain profitability for the past two years and will continue to drive its performance in the coming years.

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