InterGlobe Aviation Ltd. share price target

Maintain BUY with an increased TP of Rs 1,435 based on 15x Sept-19EPS. Interglobes 2QFY18 results beat expectations, owing to strong yield. Revenue grew 27% YoY to Rs 52.9bn, driven by RPKM growth at 15.3%, while yield increased 8.9%. PAT increased 298% to Rs 5.5bn. ASKM/RPKM growth was strong at 13/15.3%, with the load factor improving 180bps to 84%. Fuel cost per ASKM declined 6% QoQ, as ATF prices also dipped 4.8%, owing to the continuation of sourcing benefits started in 1QFY18. EBITDAR margin increased 640bps to 33.9%. Spread (RASK-CASK) was strong at Rs 0.36 per ASKM, as compared to Rs 0.01 per ASKM in 1QFY17.

EBITDAR beat led by higher yields and lower fuel cost INDIGO reported revenue of INR53b (est. INR50b; +27% YoY, -8% QoQ) and EBITDAR of INR15.6b (est. INR12b; +61% YoY, -20% QoQ), led by higher-ticket yields of INR3.57 (est. INR3.35; +8.9% YoY) and lower fuel cost of INR16.8b (est. INR18b; +8% YoY). EBITDA stood at INR7.4b (est. INR3.3b), led by lower lease rentals of INR8.2b (est. INR8.6b, +6% YoY). PAT of INR5.5b (est. INR2.2b; +294% YoY) was further helped by higher other income of INR2.1b (est. INR1.8b; +33% YoY) and lower depreciation of INR1b (est. INR1.2b; -14% YoY). Management booked undisclosed compensation from...

InterGlobe Aviation (Indigo) reported its highest ever PAT of Rs 8.1 bn (significantly above consensus estimates of Rs 6.8 bn), driven by strong traffic growth (RPK growth of 25% YoY), improved load factor (88% vs. 83% in Q1FY17) and firming up of yields (up 2% YoY).

Maintain TP of Rs 1,310, based on 16x FY19EPS. Indigos 1QFY18 results beat expectations, owing to savings on fuel. Revenue grew 25.6% YoY to Rs 57.5bn, driven by RPKM growth at 25%. During the quarter, yield was up 2%, in line with expectations. PAT increased 37% to Rs 8.1 bn.

Revenue fell by 2.77% to Rs. 4848.22 Cr in Q4FY17 when compared to the previous quarter.

To capitalize on GoI's UDAN scheme, Indigo has signed term sheets for purchase of 50 ATR 72-600 aircrafts. It plans to launch its turboprop operations by Dec '17 and add up to 20 ATR aircrafts by Dec '18. The company will give more clarity on this in coming quarters.

Indigos 4QFY17 results came in ahead of expectations, owing to higher other income. Revenue grew 19% YoY to Rs 48.5bn, driven by pax growth at 30%. During the quarter, yield was down 4%, in line with expectations. Other income rose sharply by 59% to Rs 2.9bn, owing to MTM forex gain of Rs 826mn. PAT dipped 24% to Rs 4.4 bn.

Indigo is Indias market leader in domestic aviation. Its cost leadership in a business with high fixed costs is a key advantage. Indian aviation is highly underpenetrated and provides structural growth opportunities. This, along with the narrowing price gap with alternative modes of transport, provides it with a strong growth impetus.

BUY Interglobe Aviation Ltd between at Rs. 880 - Rs. 810 for the atrget of Rs. 985 - Rs. 1080

Below est; competitive headwinds impacting yield; downgrade to Neutral Indigo's 1QFY17 revenues at INR45.8b (est INR48.2b; +9% YoY, +12% QoQ) was 5% below est. led by (a) RPK at 10.6b (est 10.9b; +19% YoY, +9% QoQ) and (b) yield at INR4.33 (est 4.4; -8% YoY, +2% QoQ). EBITDA was below est. at INR8.2b (-16.2% YoY, 1.3% QoQ), with EBITDA margin of 17.8% vs 23.1% in 1QFY16 and 19.7% in 4QFY16. PAT below est; load factors decline: PAT stood at INR5.9b (v/s est of INR6.9b; -8% YoY, +2% QoQ). Reported interest cost was higher at INR1.2b (~4x YoY and QoQ led by IndAS restatement); while tax rate was lower at 20.7%. (v/s...