IndiGo Q1 Review: Morgan Stanley Optimistic On Recovery, While Goldman Sachs Remains Cautious — What's Next?

Indigo's first-quarter results has garnered commentary from, Morgan Stanley and Goldman Sachs, as they break down the airline's performance in a turbulent operating environment.

Morgan Stanley maintains an 'overweight' rating, with an unchanged target price of Rs 6,000, acknowledging an impressive performance in a turbulent quarter driven by cost discipline. Goldman Sachs, on the other hand, holds a 'buy' rating with a target price of Rs 6,000, emphasizing a cost driven beat but remaining cautious on demand recovery. They also suggest that its a muted quarter overall.

Both Morgan Stanley and Goldman Sachs highlight the airline's efforts to manage costs and capacity amidst headwinds, yet their outlooks on the pace of recovery are divergent.

Morgan Stanley views Indigo's first-quarter performance as impressive, with revenue and Ebitdar growing by 5% and 3% year-on-year respectively. The reported Ebitdar was 4% ahead of Morgan Stanley's estimates and 7% ahead of Bloomberg consensus. This beat was primarily driven by lower fuel cost per available seat kilometer due to a stronger aircraft mix, along with a 1% year-on-year decline in ex-fuel CASKs and other operating revenues.

While Available Seat Kilometer was 1% lower than their estimate, yields were approximately 2% lower. Passenger revenue also saw a 3% decline, which was less than anticipated.

Looking ahead, Morgan Stanley expects ASKM to grow mid-high single digits year-on-year in the second quarter. Despite the full fiscal year 2026 ASKM growth guidance of low double digits, Morgan Stanley notes Indigo is well-positioned to maintain its demand pace and manage capacity effectively in a weak demand quarter.

They maintain anticipate a strong third-quarter performance, with the stock trading at attractive valuations, according to the analyst.

Goldman Sachs maintains a 'Buy' rating on Indigo, with a target price of Rs 6,000, acknowledging a cost-driven beat in the first quarter. The reported Profit Before Tax were above Goldman Sachs' estimates. This beat was primarily driven by lower fuel costs and efficient aircraft rental.

Goldman Sachs notes that while the airline's revenue for Q1 was in-line with their estimates, lower ancillary revenues and higher aircraft rental due to returned planes coming back on damp-lease resulted in revenue broadly in-line.

They highlight demand appears to have led to capacity adjustments in the first quarter itself. Goldman Sachs expects CASK to be flat in fiscal year 2026 compared to fiscal year 2025 levels. They have incorporated the Q1 results into their estimates, cutting capacity and fuel cost assumptions. Goldman Sachs also points out key risks, including increases in jet fuel prices and weakening of the Rupee against the Dollar.