Neutral InterGlobe Aviation; target of Rs 4,065: Motilal Oswal

Motilal Oswal's research report on InterGlobe Aviation

INDIGO, in the last week of Apr’24, placed its first order for wide-body aircraft with the aim of expanding its long-haul international operations starting in CY27. The company has placed an order for 30 Firm Airbus A350- 900 aircraft powered by Rolls Royce’s Trent XWB engine. In a conference call held on 30th Apr’24, the management noted that this strategic order will help INDIGO enhance connectivity from India to Southern Europe and potentially to the US and EU, responding to the growing aspirations of Indian traveler.

Outlook

INDIGO is working to increase its international presence through strategic partnerships and loyalty programs. The company added seven new destinations and 19 routes in FY24. It has eight strategic partners with 27% international share in terms of ASKs in FY24. The management has also been taking several pre-emptive measures to increase its global brand awareness, as it expects to capture a bigger share of growth from its international market in the coming years. However, competition in the sector is expected to intensify with the resurgence of Air India and the entry of a new player. The stock is trading at 21x FY26E EPS of INR 188 and 8.3x FY26E EV/ EBITDAR. We reiterate our Neutral rating on the stock with a TP of INR 4,065, valuing it at 8.5x FY26E EV/EBIDTAR.

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