IndiGo stock strategy: Up to 18% upside seen post Q4; check target prices

IndiGo share price: IndiGo has announced a plan to launch a tailor-made business product for India's busiest and business routes

IndiGo target price: Shares of InterGlobe Aviation, the parent company of IndiGo, gained 2.7 per cent to Rs 4,520 apiece on the BSE in Friday's intraday trade after brokerages maintained their optimistic views on the airline.

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Low-cost carrier IndiGo posted a profitable quarter for a sixth consecutive time, reporting a consolidated net profit of Rs 1,894.82 crore for the January to March quarter (Q4FY24). This was a 106 per cent year-on-year (Y-o-Y) growth in PAT.

On the operational front, IndiGo reported a 25.9 per cent Y-o-Y increase in revenue from operations at Rs 17,825.27 crore, while Ebitdar (earnings before interest, tax, depreciation, amortisation and rent) surged 49 per cent Y-o-Y to Rs 4,412 crore, and profit before tax (PBT) soared 92 per cent Y-o-Y to Rs 1,771 crore.

 

Going ahead, analysts have assigned target prices in the range of Rs 4,150 to Rs 5,192, implying a maximum upside of 18 per cent from Thursday's closing price.

Here are IndiGo stock's latest target prices after Q4FY24 results:

Jefferies | Hold | Target: Rs 4,150

Jefferies maintained its 'Hold' view on the stock as it believes the stock's stellar run prices-on most positives.

Motilal Oswal Financial Services | Neutral | Target: Rs 4,210

In order to capture the expected demand growth, IndiGo, the brokerage said, has increased its fleet size to 367 in FY24 from 306 in FY23. Its long-term guidance of doubling the capacity stays intact, despite short-term headwinds in terms of supply and inflationary trends in costs.
 

The brokerage has not made any material changes to its estimates. IndiGo stock, it said, is trading at ~24x FY26E EPS of Rs 187 and 9.7x EV/ Ebtidar.

JM Financial | Hold | Target: Rs 4,800

IndiGo's Q4Fy24 net profit was lower than the brokerage's estimate of Rs 2,100 crore. Net sales were down 8 per cent Q-o-Q driven by 4 per cent drop in RPK (revenue passenger kilometer), 5 per cent drop in passenger (PAX) yield. Ebitdar margins came in at 24.6 per cent down from 28 per cent in Q3FY24 driven by lower RASK (revenue available per seat kilometer; lower yield) and higher supplementary lease / Other expenditure per ASK.

Given the sharp recent run up in the stock, the stock trades at a fairly valued multiple of ~9 EV/Ebitda and ~18 P/E FY26.

Emkay Global Financial Services | Buy | Target: Rs 5,000

IndiGo's RPK rose 17 per cent Y-o-Y, but fell 4 per cent Q-o-Q to 30 billion, implying 86.3 per cent PLF. Fuel cost per ASK was 2 per cent below the brokerage's estimate, at Rs 1.72 (down 8 per cent Q-o-Q), whereas forex loss stood at Rs 165 crore.

IndiGo's fleet size saw 9 net additions Q-o-Q to 367, with aircraft on ground (AOGs) in the mid-70s. Core gross debt rose 17 per cent Q-o-Q to Rs 7,790 crore, but total cash balance was up 7 per cent Q-o-Q to Rs 34,740 crore, with a similar jump in free cash reserves at Rs 20,800 crore.

Lease liability was down 2 per cent Q-o-Q to Rs 43,490 crore. For FY24, IndiGo's reported PAT stood at Rs 8,170 crore vs losses Y-o-Y, led by 22 per cent capacity growth.

Nuvama Institutional Equities | Buy | Target: Rs 5,192

IndiGo aims to raise capacity (ASKM) by 10–12 per cent Y-o-Y in Q1FY25 as demand continues to be high. The international segment sustained robust growth led by codeshares (extended partnership with British Airways and Malaysian Airlines) and new destinations (seven added in FY24), and its share in ASKs is expected to rise to 30 per cent by FY25E (27 per cent currently).

That apart, IndiGo has announced a plan to launch a tailor-made business product for India's busiest and business routes. This product will be operational before the end of 2024. IndiGo would unveil details around the said product in August 2024.

A likely duopolistic industry structure dominated by IndiGo and Air India bodes well. This shall spur pricing discipline, thereby driving yields up over the long term. Aggressive capacity addition and robust demand to drive PAX growth. The brokerage has revised FY25/26 Ebitdar by +4 per cent/-4 per cent.