Global brokerages largely retained their positive stance on InterGlobe Aviation Ltd., the parent of IndiGo, after the airline reported a weaker-than-expected June-quarter performance, saying strong pricing and disciplined capacity growth should support earnings once fuel costs moderate.
IndiGo reported a consolidated net loss of Rs 238 crore for the June quarter, compared with a profit of Rs 2,176 crore a year earlier. Revenue rose 20% year-on-year to Rs 24,584 crore, but EBITDA fell 37% to Rs 3,267 crore, with EBITDA margin contracting to 13.3% from 25.5%. The decline was largely driven by higher aviation fuel costs, even as passenger demand and ticket yields remained healthy.
Jefferies maintained its 'Buy' rating and raised its target price to Rs 5,840 from Rs 5,380. The brokerage said the June quarter reflected a combination of elevated fuel costs and resilient yield growth, with higher fares only partly offsetting cost pressures. Jefferies added that tight industry-wide aircraft supply should continue supporting yields, laying the foundation for an earnings recovery in FY28.
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Citi also reiterated its 'Buy' rating, raising its target price to Rs 5,800 from Rs 5,100. It said demand trends remain stable and stronger yields helped cushion the impact of rising fuel costs. However, the brokerage cautioned that the cost environment remains uncertain, limiting near-term earnings visibility.
Bank of America, while maintaining its 'Buy' rating, reduced its target price to Rs 5,350 from Rs 5,800. It said the June-quarter miss was primarily driven by higher fuel expenses and warned that developments around the Strait of Hormuz remain a key risk for aviation fuel prices.
Brokerages on IndiGo
Jefferies
- Maintain Buy; Hike target price to Rs 5,840 from Rs 5,380.
- June quarter was soft, with higher fuel costs only partly offset by strong yield growth.
- The airline has adopted a measured capacity growth strategy in FY27, focusing on yields to offset higher costs.
- Despite healthy yields, near-term earnings are likely to remain subdued amid a challenging industry backdrop.
- Renewed tensions in the Middle East add to uncertainty.
- Tight industry capacity should support yields and aid an earnings recovery in FY28.
Citi
- Maintain Buy; Hike target price to Rs 5,800 from Rs 5,100.
- Q1 earnings came in below estimates.
- Strong yield growth was offset by higher fuel costs.
- Demand outlook remains steady, though the cost environment is uncertain.
- Better pricing at the operating level was offset by elevated fuel expenses.
BofA
- Maintain Buy; Cut target price to Rs 5,350 from Rs 5,800.
- Q1 earnings missed estimates due to higher fuel costs.
- Rising fuel prices remain the key near-term concern, with the Strait of Hormuz situation in focus.
- Good pricing supports the outlook, but higher fuel costs and capacity cuts remain key headwinds.
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