IndiGo share price today: IndiGo share price fell as much as 4.8 per cent to a low of Rs 4,275 per share on the BSE on Monday as investors booked profit in the stock post a healthy April-June quarter (Q1) of financial year 2024-25 (FY25).
“While we are seeing solid demand in July, helping us keep the growth outlook guidance intact, expenses have been going up. Some of the states have increased value added tax (VAT) on aviation turbine fuel (ATF), while airport partners have jacked up airport charges due to inflationary cycle,” the management highlighted in their post Q1FY25 earnings conference call.
This, analysts at Kotak Institutional Equities said, would limit the airline’s ability to hike ticket prices much; thus, limiting its chances of expanding spread between cost and revenue in the near future.
“Growing cost inflation may test the airlines’ ability to retain benefits in the near-term. Specifically, if IndiGo aims to breach spread estimates of FY2024, it will need to take price increases ahead of cost inflationary pressures. While this may not happen in the near term, we factor in such a development happening in FY2027,” the brokerage said as it cut net profit estimates by 6 per cent for FY25 and 4 per cent for FY26.
According to industry estimates, the 30-day domestic forward prices for IndiGo are down 6 per cent quarter-on-quarter (Q-o-Q) at Rs 5,609 and the 15-day prices are down by 19 per cent Q-o-Q to Rs 5,072 in Q2FY25 to date.
Yields outlook muted
In Q1FY25, IndiGo’s revenue passenger kilometer (RPKM) rose 9 per cent year-on-year (Y-o-Y) as capacity (available seat per kilometer; ASKM) expanded 11 per cent, partially offset by a 190bp Y-o-Y fall in passenger loan factor (PLF) to 86.7 per cent.
Cost of available seat kilometer (CASK) also rose 11 per cent Y-o-Y on higher fuel cost and increased damp leases.
IndiGo is targeting high single-digit Y-o-Y capacity addition in Q2FY25, with focus on high-yielding international markets (27 per cent of mix), yields shall be flat Y-o-Y and will likely fall 16 per cent Q-o-Q amid seasonality, said analysts at Nuvama Institutional Equities.
Hold for ‘extra long-range’
That said, IndiGo remains a long-term play as the airline is set to receive wide-bodied aircraft and expand its international network. It aims to induct extra-long range (XLRs) aircraft in 2025, induct wide body aircraft in 2027; and eventually double narrow body fleet by 2030.
Furthermore, codeshare agreements with various international airlines are expected to improve foreign connectivity in the medium-to-long term. Notably, IndGo entered into a codeshare partnership with Japan Airlines during Q1FY25, under which Japan Airlines’ customers will be able to travel to 14 Indian cities through Delhi and Bengaluru.
“Long haul is a new market for IndiGo. Considering the promising market proposition and captive domestic network available, IndiGo is well placed to capture the potential,” ICICI Securities said.
Overall, InterGlobe Aviation-owned IndiGo reported a 11.7 per cent Y-o-Y dip in its consolidated net profit in Q1FY25 to Rs 2,728.8 crore. The airline’s total income stood at Rs 20,248.9 crore, up 18 per cent Y-o-Y, while total expenses increased 24 per cent Y-o-Y to Rs 17,444.9 crore.
The numbers, however, beat most analysts’ estimates IndiGo booked engine OEM compensation under the ‘Other Operating Revenue’ head, which drove profitability.
Brokerages have mixed rating on IndiGo stock with ICICI Securities maintaining ‘Buy’ (unchanged target price of Rs 5,265), Nuvama Institutional Equities maintaining ‘Buy’ (increased target of Rs 5,300); Motilal Oswal Financial Services maintaining ‘Neutral’ (increased target of Rs 4,420); and Kotak Institutional Equities maintaining ‘Buy’ (unchanged target of Rs 5,400).
First Published: Jul 29 2024 | 1:17 PM IST
