Broker's call: InterGlobe (Reduce)

| Updated on July 28, 2021

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).

Published on July 28, 2021

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor

You May Also Like