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Motilal Oswal Report
Interglobe Aviation Ltd. reported a profit after tax of Rs 30.9 billion, higher than our expectation, on account of an increased scale and efficiency in operations, lower fuel costs and favorable forex.
Revenue passenger kilometers came in at 29 billion. Passenger load factor was higher at 88.7%, with available seat kilometers at 32.7 billion (estimate: 31.5 billion) and yield at Rs 5.2 (estimate: Rs 4.3).
Capacity guidance of achieving mid-teens growth in FY24 remains intact as the airline targets to service 100 million customers in FY24. Management has guided that it would add 25% capacity in Q2 FY24 versus Q2 FY23.
While yield is likely to drop in the ensuing quarter due to seasonality, management believes that the load factor is going to be better in the coming quarters as historically visible.
That said, according to our airfare tracker, the 30-day domestic forward prices are down 15% QoQ in Q2 FY24 till date and the 15-day prices are also down 15% QoQ during the same period. The same for IndiGo is down 10% for 30-day domestic forward booking and down 11% for 15-day domestic forward booking.
A total of ~11.5 million customers were served by the Indian Aviation industry in July 2023 versus an average of 12.6 million customers in Q1 but this would mainly be attributable to seasonality.
Pratt & Whitney has recalled some engine models for testing purpose and some of the aircraft would be grounded because of this testing. However, this is going to be in phases and all the aircraft fitted with P&W engines would not be grounded at once. As of date, total grounded planes count stands at ~40 (versus ~30 in the previous quarter).
We raise our revenue/Ebitda estimates by 11%/ 29% for FY24 led by a significant beat in Q1 FY24. We raise our revenue estimate by 9% for FY25.
IndiGo has an accumulated tax loss of ~Rs 160 billion because of which we believe the company would not be paying any taxes till FY25 at least until it recovers the loss.
Therefore, we increase our EPS estimate by 138%/ 51% for FY24/FY25.
We reiterate our 'Neutral' rating on the stock with a target price of Rs 2,630 premised on eight times FY25E enterprise value/Ebitdar.
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