Hold InterGlobe Aviation; target of Rs 5177: Prabhudas Lilladher

Moneycontrol • 2 days ago

Original source

Key Investment Pillars

  • InterGlobe Aviation's (INDIGO IN) operational performance was broadly in line with estimates, with a FX adjusted EBITDAR margin of 15.7%, despite fuel CASK increasing 68.9% YoY due to sharp ATF price increases.
  • CASK (ex-fuel & ex-forex) rose 13.7% YoY to INR3.65, driven by rupee depreciation and annual contractual escalations, which may continue to witness high-single to early-double-digit inflation in FY27E.
  • The company will discontinue its wide-body damp-lease operations from November 1, 2026, due to exceptionally high fuel prices and geopolitical uncertainty.
  • Yield increased 34.3% YoY to INR6.30, but attempts to cover excessive fuel and FX volatility via repricing are proving insufficient given steep inflation.

Thesis Validation Checklist

To validate the investment thesis, watch for signs of yield stickiness once fuel and FX volatility stabilize, and monitor ASKM growth, which is expected to remain subdued in 2HFY27E. Also, track the company's ability to maintain its fleet expansion plans and manage costs effectively. The stock's rerating potential hinges on the company's ability to navigate these challenges and capitalize on potential opportunities.