PL Stock Report: InterGlobe Aviation (INDIGO IN) - Q1FY24 Result Update - A record quarter! - BUY

InterGlobe Aviation (INDIGO IN) - Jinesh Joshi - Research Analyst, Prabhudas Lilladher Pvt Ltd

Rating: BUY | CMP: Rs2,565 | TP: Rs2,855

Q1FY24 Result Update - A record quarter!

Quick Pointers:

♦ Reported highest ever Revenue/PAT of Rs166.8bn/Rs30.9bn.

♦ Placed a new order of 500 aircrafts during the quarter leading to an outstanding backlog of ~1,000 aircrafts.

InterGlobe Aviation (IndiGo) reported a record quarter with all time high Revenue/PAT of Rs166.8bn/Rs30.9bn respectively aided by strong load factor of 88.7% (PLe 88.0%) and yield of Rs5.1 (PLe Rs4.9) coupled with 26.6% YoY decline in fuel CASK to Rs1.6 (PLe Rs1.7) amid fall in crude prices. We believe IndiGo is well placed to strongly benefit from 1) capacity deployment (north of mid-teens capacity guidance remains intact for FY24E, despite escalation in engine issues at P&W), 2) network expansion in domestic as well as international markets and 3) superior balance sheet (Rs 157bn of free cash). Despite a record quarter, we cut our EBITDAR estimates by ~7% each for FY24/FY25E as yields are witnessing higher pressure on sequential basis (as compared to past) while ATF prices have increased by ~11% in last 2 months. We expect revenue CAGR of 15% over next 2 years with EBITDAR margin of 25.4%/28.1% in FY24E/FY25E. Retain ‘BUY’ with a TP of Rs2,855 (EV/EBITDAR multiple of 7x Dec-24E; no change in target multiple).

Revenue at Rs 166.8bn (+29.8% YoY): Passenger revenue grew to Rs149.9bn (+30.8% YoY). Load factor improved to 88.7% (PLe 88.0%) in comparison 79.6% in 1QFY23 and 84.2% in 4QFY23 with a yield of Rs5.1. Ancillary revenue increased 20.4% YoY to Rs15.4bn. ASKM/RPKM improved 7.5%/13.3% on sequential basis to 32.7bn/29.0bn respectively.

Record PAT of Rs 30.9bn; in black for 3 quarters in a row: Fuel CASK stood at Rs1.60 (PLe Rs1.67) versus Rs2.18 in 1QFY23. Decline in fuel CASK along with soared passenger traffic (26.2mn up 30.1% YoY) and steady yield of Rs5.1 led to EBITDAR margin of 31.0%. Adjusting for FX gain, EBITDAR margin stood at 30.3%. IndiGo reported a profit of Rs 30.9bn for the quarter (best ever) as against a loss of Rs10.6bn in Q1FY23.

Key takeaways: 1) Capacity addition guidance remains intact at north of mid-teens for FY24E. Further, capacity ASKM is expected to increase by 25% YoY in 2QFY24. 2) Outstanding order book is ~1,000 aircrafts. 3) Aiming to serve 100mn passengers in FY24E. 4) Given high free cash (Rs157bn) Indigo is evaluating investments in aircraft and related assets. Further, there are plans to launch a VC arm that will invest in sectors like aviation, travel, hospitality etc. Initial capital commitment is Rs70mn. 5) Yields are witnessing a higher pressure (in “teens” range) on QoQ basis than past trends. 6) Fleet size impact due to escalation in engine issues at P&W is negligible (count is in “single digit”). 7) Accumulated tax losses are at Rs160bn. 8) All new aircrafts will be powered by CFM engines eliminating the risk of aggravation in problems at P&W, if any. 9) Fuel efficiency of CFM engine is more or less at par with P&W (only a marginal difference is there). 10) Share of international ASK is expected to remain at 30%.

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