IndiGo share price cracks over 13% on poor Q2 show; brokerages express mixed views about the stock

IndiGo share price cracked over 13 per cent in morning trade on Monday, October 28, as the company's weak September-quarter (Q2FY25) earnings spooked investors. Shares of InterGlobe Aviation opened at ₹4,108.80 against its previous close of ₹4,364.65 and plunged 13.43 per cent to the level of ₹3,778.50. The stock, however, pared losses and traded 8.42 per cent lower at ₹3,996.95 around 10 am.

IndiGo Q2 results

As Mint reported earlier, the aviation company, after market hours on Friday, October 25, reported a consolidated net loss of ₹986.7 crore for Q2FY25, compared to a net profit of ₹188.9 crore in the year-ago period.

The company said in its exchange filing that the net loss for the quarter was primarily caused by increased fuel expenses and a record number of groundings, although those have begun to decrease now.

At the operating level, earnings before interest, tax, depreciation, amortisation and rent cost (EBITDAR) profit or consolidated operating profit for the September quarter came in at ₹2,434 as against an operating profit of ₹2,446.5 crore in the year-ago quarter.

Brokerages mixed after Q2 show

Brokerage firms have mixed views about the stock after the company's Q2 earnings. 

Some brokerage firms, including Nuvama Wealth Management, downgraded the stock in the wake of the company's September quarter scorecard.

Nuvama downgraded the stock to a 'hold', cutting FY25E and FY26E EBITDAR by 14 per cent and 7 per cent, respectively. The brokerage firm has a target price of ₹4,415.

"Following a 108–133 per cent outperformance to US/European peers since Jan-22, we are downgrading IndiGo to ‘hold’ on 1.5 times+ valuations to global peers and valuation premium to global LCCs about 2SD above average, slowing domestic demand and overcapacity concerns. September-November 2024 flight schedules imply a domestic share loss as well. Relentless promoter selling while IndiGo shifts from LCC to a hybrid model raises risk," said the brokerage firm.

Nuvama believes the near-term outlook for the company looks challenging as capacity growth outpaces demand growth, affecting PRASK.

"Current valuations are unsupportive, but positive factors make risk-reward balanced. We are cutting FY25E/26E EBITDAR by 14%/7% as we moderate our yield forecasts, revise down the EV/EBITDAR to 8 times (from 9 times) and roll forward the valuation to Sep-26E, yielding a 17 per cent cut in target price to ₹4,415," said Nuvama.

Brokerage firm Motilal Oswal Financial Services has a neutral view of the stock and a target price of ₹4,130.

The brokerage firm has lowered its EBITDA estimates for FY25, FY26, and FY27 by 5 per cent, 9 per cent, and 10 per cent, respectively. However, it has raised its EPS estimates by 7 per cent each for FY26 and FY27 to account for lower tax as accumulated losses stand at ₹13,000 crore.

On the other hand, Kotak Institutional Equities has a buy call on the stock with a fair value of ₹5,200.

The brokerage firm highlighted that the sharp miss in profit before tax was driven by transient issues—groundings and related compensation, as well as unexpected fuel inflation. Another overhang was the heightened seasonality in the context of the sharp uptick in demand/supply in the prior year.

Kotak said the overall demand trends remain healthy, as reflected in unchanged double-digit full-year growth guidance and a modest decline in TRASK on a high YoY base for Q3.

"We lower FY27 estimates by about 10 per cent and fair value by 4 per cent to ₹5,200 on roll-forward. We take note of the recent endeavours of expanding infrastructure, improving customer loyalty, growing distribution reach and attempts to grow offerings beyond flying," said Kotak.

IndiGo share price trend

InterGlobe Aviation share price has seen solid gains over the last year, rising almost 80 per cent. The stock hit its 52-week low of ₹2,415 on November 1 last year and a 52-week high of ₹5,033.20 on September 12 this year.

On a monthly scale, the stock is down 16 per cent in October after a one per cent decline in the previous month. However, since February and August this year, the stock gained every month.

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