India's IndiGo Soars: Prabhudas Lilladher Issues Strong BUY Call with Rs 6,332 Target!

Prabhudas Lilladher's latest research report on InterGlobe Aviation, the parent company of IndiGo, reiterates a BUY recommendation with a price target of Rs 6,332. This target is based on an 11x FY27E EBITDAR multiple, with the target multiple remaining unchanged.

The brokerage firm has reduced its Earnings Per Share (EPS) estimates for Fiscal Years 2026, 2027, and 2028 by 3%, 6%, and 3% respectively. This revision is primarily due to updated foreign exchange (FX) assumptions reflecting sharp rupee depreciation. This depreciation is expected to increase lease liability obligations and consequently lead to higher interest costs and supplementary rentals.

Furthermore, the report notes that the number of aircraft on ground (AoG) is unlikely to decrease significantly, remaining around 40 through FY26E. This stable high AoG count will continue to keep aircraft and engine lease rentals elevated. Inflation is also anticipated to impact the cost structure in FY26E.

However, Prabhudas Lilladher draws comfort from positive commentary regarding pricing power, with Passenger Revenue Per Available Seat Kilometer (PRASK) expected to remain flat or grow marginally in the third quarter of fiscal year 2026 (3QFY26E). Additionally, the Available Seat Kilometers (ASKM) growth guidance for FY26E has been revised upwards to early teens. The firm forecasts a Compound Annual Growth Rate (CAGR) of 12% for sales and 11% for EBITDAR over the period of FY25 to FY27E.

Key risks to this call include excessive FX and Aviation Turbine Fuel (ATF) volatility.

Impact: This report provides a strong positive signal for InterGlobe Aviation, influencing investor sentiment and potentially driving stock price movement. It highlights resilience despite cost pressures, indicating potential for growth. Rating: 8/10.

Difficult terms: FX adjusted EBITDAR margin: This metric represents a company's operational profitability after accounting for foreign exchange fluctuations, excluding interest, taxes, depreciation, and amortization. It gives a clearer picture of core business performance. EPS (Earnings Per Share): The portion of a company's profit allocated to each outstanding share of common stock, indicating profitability on a per-share basis. FY (Fiscal Year): A 12-month accounting period used by governments and businesses for financial reporting; in India, it typically runs from April 1 to March 31. PLe (Prabhudas Lilladher Estimate): The financial forecast or projection made by the brokerage firm Prabhudas Lilladher. Rupee depreciation: A decrease in the value of the Indian Rupee relative to other foreign currencies, making imports more expensive and exports cheaper. Lease liability obligations: The total amount of money a company owes for assets it has leased (e.g., aircraft) over a specified period. Interest cost: The amount paid by a borrower to a lender for the use of borrowed money. Supplementary rentals: Additional rental payments made in addition to the base rental fees, often related to specific usage or conditions. AoG (Aircraft on Ground): Refers to aircraft that are temporarily out of service, typically for maintenance, repairs, or operational issues, impacting revenue generation. Elevated: Higher than the usual or expected level. Inflation seep into the cost structure: When rising general price levels lead to an increase in a company's operating expenses. PRASK (Passenger Revenue Per Available Seat Kilometer): A key performance indicator for airlines measuring the revenue generated for each seat flown one kilometer. ASKM (Available Seat Kilometers): A measure of an airline's capacity, calculated by multiplying the number of seats available by the distance flown. CAGR (Compound Annual Growth Rate): The average annual growth rate of an investment over a specified period longer than one year, assuming profits are reinvested. EBITDAR (Earnings Before Interest, Taxes, Depreciation, Amortization, and Rent): A measure of a company's operating performance used to evaluate profitability before certain fixed costs and non-cash charges. ATF volatility: Significant and unpredictable fluctuations in the price of Aviation Turbine Fuel, a primary operating expense for airlines.