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Centrum Broking Report
India's domestic air traffic has nearly reached its pre‐Covid levels and international traffic is fast scaling up after the resumption of scheduled international travel in Mar‐22. Fares meanwhile have strengthened from the lows of Feb‐22 and have offset the incremental burden of higher fuel costs.
IndiGo continues to consolidate its domestic leadership position and is making a major push towards international markets through codeshares. It expects the international segment's share to reach 40% in five years from 21% pre‐Covid. Guidance is robust – ASK growth of 150% in Q1FY23 and 55‐60% in FY23. Improved fleet utilisation and lower maintenance costs should aid unit cost reductions.
Any meaningful reduction in ATF costs should act a major upside trigger for the stock. Stock trades at 11x/8.6x FY23E/FY24E EBITDAR. We upgrade IndiGo to BUY with price target of Rs 2,284 (10x FY24E EBITDAR).
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