InterGlobe Aviation Ltd. share price target

We maintain rating on the stock to a NEUTRAL with a TP of Rs 909 (-9.5%) based on 8.0x Sept 20E EV/EBITDAR. Despite a 13.2% YoY increase in 1QFY19 revenues to Rs 65.1bn, Indigos earnings disappointed as calculated EBITDAR at Rs 10.3bn was down 47.1% YoY. Revenues were adversely impacted by yield at Rs 3.62 (-5.5% YoY) while EBITDAR was impacted by fuel costs/ASKM rising 30.8% YoY to Rs 1.53 and other operating expenses/ ASKM rising 22.1% YoY to Rs 1.19. Reported PAT consequently plunged 96.6% YoY to Rs 278mn.

InterGlobal Aviation Ltd (Indigo) is one of the most efficient low cost carriers (LCC) with a market share of 40% in Indian aviation sector. Q4FY18 reported Revenue grew by 20% YoY. But negatively impacted with a 73% YoY fall in PAT due to higher discounts and rise in fuel cost....

We maintain the stock to a NEUTRAL with a TP of Rs 1,125 (-6.2%) based on 14.5x FY20 EPS. Despite a 20.6% YoY increase in 4QFY18 revenues to Rs 58bn, Interglobes earnings disappointed as EBITDAR at Rs11.2bn was down 15.7% YoY. Revenues were adversely impacted by yield at Rs3.31 (-5.5% YoY) while EBITDAR was impacted by higher fuel costs per ASKM rising 10.3% YoY. Reported PAT for 4QFY18 was down 73.3% and was impacted by foreign exchange loss of Rs925mn (4QFY17 profit of Rs2.5bn).

INDIGO's revenue increased 20% YoY (-6% QoQ) to INR58b (our estimate: INR60b). EBITDAR of INR11.2b (-16% YoY, -42% QoQ) came in significantly below our estimate of INR14.8b due to a lower yield of INR3.82 (est. of INR4.08; -4% YoY, -11% QoQ) and higher fuel cost of INR1.39 (est. of INR1.36; +10% YoY, +10% QoQ). Passenger ticket yield stood at INR3.31 (est. of INR3.51; -5.6% YoY, -10.6% QoQ). PAT of INR1.2b (est. of INR3.7b; -73% YoY, -85% QoQ) was further impacted by higher lease rentals of INR9.9b (est. of INR9.6b; +20.5% YoY, +5.2% QoQ). Higher other income of INR2.6b (est. of INR2.1b; -12.3% YoY, -5.2% QoQ) largely offset the impact of higher depreciation of INR1.3b (est. of INR1.15b; +22% YoY, +19.8% QoQ) and higher interest expense of INR927m (est. of INR837m; +19.4% YoY, +9.8% QoQ).

On DGCA's order, InterGlobe Aviation (Indigo) has grounded 8 A320 neo aircrafts (with engine serial number of beyond 450) until further notice (Go Air also to ground 3 aircrafts).

InterGlobe Aviation (Indigo) reported PAT of Rs 7.6 bn, ahead of consensus estimate of Rs 6.6 bn, mainly on (1) credits received from engine manufacturer P&W; and (2) better revenue management (RASK increased 10.4% YoY on 6% increase in yields and higher load factor of 88.5%).

Maintain BUY TP of Rs 1,395 based on 14.5x FY20 EPS. Interglobes 3QFY18 results were in line with expectations. Revenue grew 23.9% YoY to Rs 61.8bn, driven by RPKM growth at 14.6%, while yield increased 6.3%. PAT increased 56.6% to Rs 5.7bn. ASKM growth was good at 13%, with the load factor improving 120bps to 88.5%. Fuel cost per ASKM increased 13.7% QoQ, as avg. ATF prices shot up. EBITDAR margin increased 240bps to 31.3% due to improved pricing. Margin (RASK-CASK) was strong at Rs 0.49 per ASKM in a seasonally strong quarter, as compared to Rs 0.30 per ASKM in 3QFY17.

INDIGO reported revenue of INR61.8b (est. of INR60.4b; +24% YoY, +17% QoQ) and EBITDAR of INR19.4b (est. of INR18.4b; +34% YoY, +24% QoQ) ??? implying a marginal beat, led by higher total yield of INR4.29 (est. of INR4.25; +8% YoY, +3% QoQ) due to credits received from manufacturers. Passenger ticket yield stood at INR3.7 (est. of INR3.73; +6.3% YoY, +3.7% QoQ). PAT of INR7.6b (est. of INR6.5b; +56% YoY, +38% QoQ) was boosted by higher other income of INR2.7b (est. of INR1.8b; +58% YoY, +27% QoQ) and lower depreciation of INR1.1b (est. of INR1.2b; 9% YoY, +5% QoQ). In 3QFY18, forex gain stood at INR803m, of which management booked INR408m in other income and INR395m in other expenses. Like in the previous quarter, management booked undisclosed credits from manufacturers (related to aircraft grounding, and delivery delays in early part of 3QFY18), supporting profitability.

India's aircraft order book is extremely strong and we expect domestic capacity to grow at 16% CAGR over FY17-20 (total capacity to grow at 14% CAGR). INDIGO has the largest order book among peers, which assures robust growth prospects for the airline. We model ~20% ASK CAGR over FY18-20 for INDIGO....

InterGlobe Aviation (Indigo) reported PAT of Rs 5.5 bn, ahead of consensus estimate of Rs 3.2 bn, mainly driven by credits received from the engine manufacturer (P&W;) in lieu of the loss of revenue due to grounding/ operational issues of A320neos.