IndiGo Q1 preview: Analysts expect loss to narrow despite high ATF prices

InterGlobe Aviation Q1FY23 results: Analysts expect IndiGo's net loss to narrow sharply due to increased air traffic

IndiGo Q1 Preview: The April-June quarter (Q1) of fiscal year 2022-23 (Q1FY23) may prove to be the best post-pandemic years for airlines as domestic air traffic nears pre-Covid levels amid a bounce back in leisure travel, analysts said.
 

Brokerages expect losses for the industry to narrow down sequentially, despite nearly 40 per cent quarter-on-quarter (QoQ) growth in aviation turbine fuel (ATF) prices, on the back of increase in operation scale and yield improvement. 
 

However, load factors are impacted compared to pre-Covid levels due to sharp rise in ticket prices. Further elevated fuel prices could put pressure on Ebitda (earnings before interest, tax, depreciation, and amortization) despite yields, load factors and passenger levels improving QoQ.
 

"With increase in vaccination counts and receding fear of new Covid-19 wave, consumer confidence has led pax traffic to touch new highs. Revenge travel, along with corporate travel entirely coming back, has aided domestic passenger traffic to recover fully. We expect available seat kilometer (ASKMs) to increase QoQ for low cost carriers (LCCs)," said Prabhudas Lilladher in its earnings preview report.
 

InterGlobe Aviation – the parent company of IndiGo airlines – is slated to report its Q1FY23 results on Wednesday, August 3.

SpiceJet, on the other hand, is yet to report its Q4FY22 results, and has provided no intimation on Q1 results either.
 

Here’s what key brokerages expect from IndiGo:
 

Prabhudas Lilladher

We expect IndiGo to report a 66 per cent quarter-on-quarter (QoQ) increase in sales to Rs 13,353 crore, led by increase in yields, passenger levels and load factors sequentially. On a yearly basis, sales could grow 344 per cent. 
 

However, margins are expected to be under pressure at 7.3 per cent owing to higher ATF prices. Net loss is pegged at Rs 797.4 crore, down from Rs 3,179.3 crore last year, and Rs 1,679.8 crore in Q4FY22. 
 

Centrum Broking

Rupee depreciated 4.3 per cent against the US dollar in Q1FY23 to Rs 78.9 per dollar which should drive steep forex mark-to-market (MTM) loss of Rs 1,470 crore for IndiGo. We expect Ebitdar of Rs 1,130 crore and net loss of Rs 790 crore on reported basis.
 

We expect ASKM and revenue passenger kilometer (RPKM) to grow 36.7 per cent and 41.5 per cent QoQ with blended load factor of 79.4 per cent (up from 76.6 per cent in Q4FY22).
 

We build 20 per cent QoQ increase in revenue yield/RASK for IndiGo to Rs 5.3/Rs 4.74 led by strengthening in fares. With unit fuel cost likely to rise 34 per cent QoQ to Rs 2.12, we expect gross spread (RASK-Fuel) to grow at lower pace of 10 per cent QoQ to Rs 2.62.
 

Elara Capital

On the back of strong airfares and demand revival, the brokerage believes IndiGo may post net profit of Rs 4,586.3 crore, and Ebitdar of Rs 7,859.8 crore in Q1FY23 (up from Rs 650.2 crore in Q4FY22).
 

Moreover, driven by improved average domestic airfares, QoQ yields for IndiGo could improve 57 per cent.