Comments
Target: ₹3,961
CMP: ₹3,545.05
We attended the InterGlobe Aviation (IndiGo) analyst meet wherein management highlighted plans to add more than one aircraft per week, increase capacity by early double digits, expand the network by launching 10 new destinations and add 5,500-6,000 employees in FY25E.
Despite escalation in engine issues at P&W, growth guidance of early double digits is an indication IndiGo is well placed to mitigate supply chain challenges. In addition, commentary on yields was positive (expectation of growth in Q4-FY24 versus a flattish guidance given earlier) with increasing focus on international markets.
We increase our EBITDAR assumptions by about 4 per cent over the next 2 years as we tweak our ASKM forecast given the growth commentary. Overall, we expect revenue CAGR of 13 per cent over FY24E-FY26 with EBITDAR margin of 23.9/23.2/21.9 per cent in FY24E/FY25E/ FY26E (lower in last year due to higher fuel cost).
IndiGo expects gross addition of >1 aircraft per week in FY25. Nonetheless, given AoG figure is in mid-70’s net addition will be lower. Current order book is abour 960 and steady delivery is expected from the recent order of 500 aircrafts placed in 2023.
We retain our ‘Accumulate’ rating with a revised target price of ₹3,961 (earlier ₹3,312) as we increase our EV/EBITDA multiple to 8.5x (earlier 7.5x).
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