IndiGo shares gained over 3% after its September quarter results, as leading brokerages remained optimistic about its pricing strength, revenue growth and potential margin improvement despite continued losses.
Shares of InterGlobe Aviation, the parent company of IndiGo, rose more than 3% on Friday, October 30, following the airline's September quarter results. Despite reporting a net loss, the company received positive assessments from major brokerages, including Nomura, HSBC and Jefferies.
Analysts pointed to strong passenger yields, pricing power and resilient demand as key factors supporting the airline's outlook. However, they also highlighted concerns about rising fuel expenses and the impact of higher operating costs on future earnings.
Nomura retained its 'Buy' recommendation on IndiGo and increased its price target to ₹6,200 from its previous estimate. According to the brokerage, the airline's second-quarter performance demonstrated its ability to maintain pricing strength despite cost pressures and higher demand.
IndiGo's earnings before interest, taxes, depreciation, amortisation and rent (EBITDAR) exceeded market expectations. Better-than-anticipated passenger revenue per available seat kilometre (PRASK) and stronger ticket yields supported the performance.
Nomura expects the airline's margins to improve sequentially in the December quarter, even with higher fuel prices. It also believes IndiGo could pass on approximately 80–90% of additional cost increases through ticket pricing.
The brokerage raised its EBITDA estimates for FY27 and FY28 by 11% and 3%, respectively, reflecting its improved outlook.
HSBC also maintained its 'Buy' rating on IndiGo, setting a price target of ₹5,545. The brokerage reported that the airline's Q2 EBITDA was 25% higher than its estimates, primarily due to stronger passenger yields and lower fuel expenses.
IndiGo has indicated that PRASK could grow by more than 25% in the third quarter and across FY27. The airline is also planning capacity expansion in the low-single-digit range.
HSBC expects non-fuel unit costs to rise by high-single-digit to low-double-digit percentages. It noted that growing ancillary services and cargo operations could play an important role in supporting the airline's revenue and profitability.
Jefferies maintained its 'Buy' recommendation on IndiGo, with a price target of ₹5,650. While describing the September quarter performance as relatively weak, the brokerage said the results were broadly in line with expectations.
Passenger yields increased 34% year-on-year, helping offset the impact of higher fuel and other operating expenses.
Jefferies noted that IndiGo's management continues to focus on maintaining pricing discipline. The airline has guided for low-single-digit capacity growth and PRASK growth of more than 25% in Q3.
However, the brokerage cautioned that the company's earnings remain vulnerable to changes in fuel prices and non-fuel operating expenses. It reduced its FY27 earnings per share estimate by 9% and its FY28–FY29 estimates by 2%.
InterGlobe Aviation reported a consolidated net loss of ₹1,879 crore for the September quarter. This represented an improvement compared with the ₹2,581.7 crore loss recorded during the corresponding period last year.
Despite remaining in the red, the airline registered strong revenue growth during the quarter.
IndiGo's revenue rose 25.9% year-on-year to ₹23,364 crore in the September quarter, compared with ₹18,555.3 crore in the same quarter of the previous financial year.
The increase reflects stronger operating revenue and passenger demand.
The airline's EBITDAR increased to ₹2,460 crore from ₹1,114.3 crore in the year-ago quarter. Its EBITDAR margin also improved to 10.5%, compared with 6% in the corresponding period last year.
This improvement indicates stronger operating performance, although fuel prices and other expenses remain important factors for future profitability.
IndiGo's foreign exchange loss narrowed significantly to ₹1,333 crore during the September quarter, compared with ₹2,892 crore in the same period last year.
The reduction helped limit the impact of currency-related expenses on the airline's overall financial performance.
Brokerages remain broadly positive about IndiGo's prospects, supported by its ability to improve ticket yields and recover a substantial portion of rising costs through pricing.
Nevertheless, higher fuel expenses, increasing non-fuel costs and earnings sensitivity to input prices remain important risks. The airline's ability to sustain passenger demand, manage capacity and improve margins will be crucial in determining its financial performance in the coming quarters.