Apr'25 View on Interglobe Aviation Ltd

Interglobe Aviation Ltd (Indigo) is India’s largest passenger airline operating as a low-cost carrier. Serving 86 destinations including 24 international destinations, it provides passengers with a simple, unbundled product, fulfilling its singular brand promise of providing “low fares, on-time flights, and a courteous and hassle-free service” to its customers. IndiGo commenced operations in August 2006 with a single aircraft and has grown its fleet to 262 aircrafts. • Q3FY25: Captures all gains of fuel cost decline; ex-fuel cost takes some sheen away. • Indigo is reducing near-term real impact of forex through hedging and natural hedge. • International volumes of Indian carriers are growing at 12% yoy; international carriers report yoy declines. • Key downside risk is from higher-than-expected cost inflation, well built into estimate. • We value Indigo at on 20x FY27E EPS, including recurring forex costs. Q3FY25 Earnings update: Positives: • Sharp 4% beat on revenues (up 14% yoy) in Q3FY25. • PAT, adjusted for forex (both losses and gains), was up 26% yoy. • Indigo has meaningfully captured the uptick in domestic demand in its load factors when competitors have seen a material downtick in load factors. • Indigo has been making meaningful inroads in market share in recent months. Negatives: • Higher-than-expected CASK (ex-fuel, ex-forex).