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Centrum Broking
InterGlobe (Reduce)
Target: ₹1,517
CMP: ₹1667.1
IndiGo’s net loss of ₹3,180 crore in Q1-FY22 was above our loss estimate of ₹2,730 crore due to lower ticket yields. Available seat kilometres (ASKM)/RPKM (Revenue passenger kilometres) fell 42 per cent/51 per cent q-o-q to ₹1,120 crore/₹660 crore, with load factor at 58.7 per cent.
Revenue per available seat-kilometre (RASK) declined 35 per cent y-o-y to ₹2.73 (estimate: ₹2.95).
IndiGo, with its free cash balance of ₹5,600 crore and wherewithal to raise further liquidity (including by way of equity), remains in a comfortable position to tide through the current crisis. As the second wave ebbs, recovery in domestic traffic is imminent. However, at current levels, the stock already factors a robust traffic recovery in FY23 (to 90-95 per cent of pre-Covid levels) along with buoyant spreads.
We steeply downgrade FY22 earnings to net loss of ₹5,160 crore (loss of ₹2,730 crore earlier) to reflect weak yields with no material change in FY23 earnings (reduced by 1.6 per cent).
Valuation of 10.5x FY23 EBITDAR of ₹10,000 crore leaves little room for error vs slower traffic recovery, lower yields or higher costs. Maintain Reduce with revised target price of ₹1,517 by March 2022 (10x FY23E EBITDAR).
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