IndiGo Reports Q2 Loss, Shares Rise 2% Amid Broker Optimism
IndiGo's shares see a 2% increase following the airline's Q2 earnings report, despite a net loss of ₹1,879 crore.
IndiGo's Q2 net loss narrows to ₹1,879 crore, down 27% year-on-year.
Brokerages maintain 'buy' ratings, citing strong pricing power and revenue growth.
Passenger yields increased by 34.3%, helping offset rising fuel costs.
Shares of InterGlobe Aviation, the parent company of IndiGo, experienced a nearly 2% increase in early trading on Friday after the airline disclosed its fiscal second quarter earnings. Despite reporting a consolidated net loss of ₹1,879 crore for the September quarter, which is a 27% improvement from the previous year, the market reacted positively. Brokerages such as Jefferies, Nomura, and HSBC retained their 'buy' ratings, underscoring IndiGo's robust pricing power and improving revenue yields.
The airline's stock was trading at ₹4,755, reflecting a 1.7% rise. Nomura's revised target price of ₹6,200 suggests a potential upside of approximately 30%. Jefferies and HSBC set target prices of ₹5,650 and ₹5,545, indicating possible gains of 19% and 17%, respectively. Despite a 7.1% decline in stock value this year, IndiGo has outperformed the Nifty 50 index, which has seen a 12.2% drop during the same period. As of 9:19 am, the Sensex was down 7 points, while the Nifty remained flat.
Jefferies maintained its 'buy' rating for IndiGo, with a target price of ₹5,650. The brokerage described the airline's performance in the July-September quarter as soft but largely in line with expectations. A significant 34% year-on-year increase in passenger yields helped mitigate the impact of rising fuel and operating costs. IndiGo's management indicated a focus on maintaining pricing power, projecting low-single-digit capacity growth and over 25% growth in passenger revenue per available seat kilometer (PRASK) for the upcoming December quarter.
Nomura also reaffirmed its 'buy' rating, increasing its target price to ₹6,200, the highest among the brokerages. The firm noted that IndiGo's second-quarter results demonstrated strong pricing power amid robust demand and cost inflation, with EBITDA exceeding consensus estimates. Nomura anticipates sequential margin improvements in the December quarter, estimating that pricing actions could recover 80-90% of cost increases. They have raised their FY27 and FY28 EBITDA estimates by 11% and 3%, respectively.
HSBC echoed the sentiment, keeping its 'buy' rating with a target price of ₹5,545. The brokerage highlighted that IndiGo's second-quarter EBITDA surpassed Visible Alpha consensus estimates by 25%, driven by stronger yields and lower-than-expected fuel costs. However, non-fuel unit costs are projected to rise significantly. The airline's focus on ancillary and cargo revenue is seen as a potential growth avenue. Despite the challenges, IndiGo's management remains optimistic about achieving over 25% PRASK growth in both the December quarter and FY27.
