In early trading on Monday, October 28, IndiGo’s share price fell more than 13% as investors were alarmed by the company’s poor September-quarter (Q2FY25) results. Initially trading at ₹4,108.80, InterGlobe Aviation’s shares fell 13.43% to ₹3,778.50 from their previous close of ₹4,364.65. However, the stock reduced its losses and was down 8.42% at ₹3,996.95 at roughly 10 a.m.
IndiGo Q2 results
The aviation company announced a consolidated net loss of ₹986.7 crore for Q2FY25 after market hours on Friday, October 25, as previously reported by sources. This is in contrast to the net profit of ₹188.9 crore for the same time last year.
In its exchange statement, the business stated that a record number of groundings and higher fuel costs were the main causes of the quarter’s net loss, but those have since started to decline.
Consolidated operational profit, also known as earnings before interest, tax, depreciation, amortisation, and rent cost (EBITDAR) profit, was ₹2,434 for the September quarter, compared to ₹2,446.5 crore for the same period last year.
After the company’s Q2 earnings, broking companies’ opinions on the stock are divided.
Nuvama Wealth Management was among the broking firms that downgraded the stock following the release of the company’s September quarter scorecard.
The stock was downgraded to a “hold” by Nuvama, which also reduced FY25E and FY26E EBITDAR by 14% and 7%, respectively. ₹4,415 is the target price set by the broking business.
“Following a 108–133 per cent outperformance to US/European peers since Jan-22, we are downgrading IndiGo to ‘hold’ on 1.5 times+ valuations to global peers and valuation premium to global LCCs about 2SD above average, slowing domestic demand and overcapacity concerns. September-November 2024 flight schedules imply a domestic share loss as well. Relentless promoter selling while IndiGo shifts from LCC to a hybrid model raises risk,” said the brokerage firm.
Given that capacity development is outpacing demand growth, which will impact PRASK, Nuvama thinks the company’s near-term prospects appear difficult.
“Current valuations are unsupportive, but positive factors make risk-reward balanced. We are cutting FY25E/26E EBITDAR by 14%/7% as we moderate our yield forecasts, revise down the EV/EBITDAR to 8 times (from 9 times) and roll forward the valuation to Sep-26E, yielding a 17 per cent cut in target price to ₹4,415,” said Nuvama.
Motilal Oswal Financial Services, a broking firm, has a target price of ₹4,130 and a neutral outlook on the stock.
For FY25, FY26, and FY27, the broking firm has reduced its EBITDA projections by 5%, 9%, and 10%, respectively. However, since accumulated losses total ₹13,000 crore, it has increased its EPS expectations by 7% for FY26 and FY27 to account for lower taxes.
Kotak Institutional Equities, on the other hand, has a buy call on the stock, which is valued at ₹5,200.
The broking firm pointed out that temporary problems—groundings and associated compensation—as well as unforeseen fuel inflation were the main causes of the significant loss in earnings before taxes. The increased seasonality in light of the previous year’s dramatic increase in production and demand was another overhang.
As seen by a slight drop in TRASK on a high YoY basis for Q3 and an unchanged double-digit full-year growth projection, Kotak stated that overall demand patterns are still solid.
“We lower FY27 estimates by about 10 per cent and fair value by 4 per cent to ₹5,200 on roll-forward. We take note of the recent endeavours of expanding infrastructure, improving customer loyalty, growing distribution reach and attempts to grow offerings beyond flying,” said Kotak.
IndiGo: Share price trend
Over the past year, InterGlobe Aviation’s share price has increased by about 80%. On November 1 of last year, the stock fell to a 52-week low of ₹2,415; on September 12 of this year, it reached a 52-week high of ₹5,033.20.
Following a 1% drop in the previous month, the stock is down 16% in October every month. Nevertheless, the stock has increased each month from February and August of this year.
