InterGlobe Aviation Ltd., the operator of IndiGo Airlines, is well positioned for the long run, but issues related to engine failure remain even as it posts stellar profits in the June quarter.
The airline reported profit for the third straight quarter due to strong demand for air travel during the April–June period.
A combination of booming passenger traffic and challenges faced by other airlines strengthened the duopoly of IndiGo and the Tata Group-owned airlines in June as their combined market share in the Indian aviation market neared 90%.
IndiGo has grown to capture 63.4% of the market share in June from 56.8% in April—the last month Go First operated before filing for bankruptcy in early May.
InterGlobe Aviation Q1FY24 Highlights (Consolidated, YoY)
Revenue up 30% at Rs 16,683 crore. (Bloomberg Estimate: Rs 15,622 crore)
Ebitdar up 679% at Rs 5,169.5 crore.
Ebitdar margins at 31% vs 5%.
Net profit at Rs 3,090.6 crore vs Net loss of Rs 1,064.3 crore (Bloomberg Estimate: Rs 1,719 crore)
However, the airline may face challenges in capacity expansion as nearly 40 of its planes are grounded due to engine failures, even as Pratt & Whitney has recalled its engines for testing purposes, which may impact more aircraft in the future.
The airline currently has 316 aircraft in its fleet, including two freighters and two B777s on wet lease.
Here's what analysts said about its Q1 performance:
Motilal Oswal
Reiterate 'neutral' rating with a target price of Rs 2,630 a share, implying an upside of 3%.
Raise revenue and Ebitda estimates by 11% and 29%, respectively, for FY24 led by a strong beat in the first quarter.
Well-positioned to expand in the domestic market and working to increase its international presence through partnerships.
Despite a positive outlook and strong demand, several challenges related to engine issues remain to be addressed.
Emkay Global
Retain 'buy' with a target price of Rs 3,000 a share, implying an upside of nearly 17%.
Well-placed to grow given net fleet additions and a competition faced with its own troubles.
Nearly 1,000 aircraft are on order, which positions it well for the long run.
Raise FY24 and FY25 net profit estimates by 31% and 38%, respectively, factoring in the tax loss benefit and higher other income.
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