IndiGo, operated by InterGlobe Aviation, reported earnings that exceeded expectations for the quarter ending March 2024, leading to multiple target price increases as analysts expressed optimism.

What Happened: The airline achieved a 106% year-on-year increase in net profit, totalling ₹1,894 crore. This significant growth stemmed from robust demand for air travel, substantial capacity additions, low jet fuel costs, and higher yields, though partially offset by aircraft outages.

Revenue from operations rose by 26% to ₹17,825.30 crore for the fourth quarter of fiscal year 2024. IndiGo’s earnings before interest, taxes, depreciation, amortization, and rent (EBITDAR) soared to ₹4,412.3 crore, up from ₹2,966.5 crore a year earlier, while the margin improved to 24.8% from 20.9%.

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Analysts Weigh In; Morgan Stanley upgraded IndiGo to “overweight”, setting a target price of ₹5,142 per share. The brokerage noted that the airline’s fourth-quarter EBITDA was 10% above estimates. Despite expecting flat revenue per available seat kilometre year-on-year due to rising inflationary pressures, IndiGo plans to introduce loyalty programs, business class services, and long-haul international flights.

Jefferies kept a ‘hold’ rating but increased its target to ₹4,150, citing strong yield growth which helped manage cost pressures. IndiGo also plans to launch business-class services by the end of 2024.

Emkay Global forecasts a 10-12% capacity growth in the first quarter of fiscal year 2025, with aircraft outages expected to remain steady. They maintained a “buy” rating with a target price of ₹5,000, highlighting IndiGo’s expansion into business-class offerings and international routes by August 2024.

Nuvama also maintained a “buy” rating, raising its target by 21% to ₹5,192, praising IndiGo’s market share gains and high aircraft utilisation.

However, Nuvama cautioned about the uncertainties in regulatory policies and adverse tax structures, which could increase costs and affect profitability. An economic downturn could also pressure demand for corporate and leisure travel, impacting load factors and profitability due to the airline’s high operating leverage.

Price Action: Interglobe Aviation Ltd. shares were trading 1.53% lower at ₹4,333.35 on Friday morning.

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