Interglobe Aviation Q3 Results Review - Better Placed To Navigate Engine Challenges: Prabhudas Lilladher

Prabhudas Lilladher Report

We cut our Ebitdar estimates by 9%/2% for FY25E/FY26E as we re-align our  available seat kilometers assumptions amid escalation in engine issues at Pratt & Whitney (~21% of the fleet is currently grounded).

While InterGlobe Aviation Ltd. has taken mitigation measures like inducting aircrafts on damp lease it is likely to result in higher rental outgo in the near term. Nonetheless, artificial fleet scarcity arising from higher Aircraft on Ground can keep pricing at elevated levels and we expect yields of Rs 4.9/Rs 4.7 for FY25E/FY26E.

Overall, we believe Indigo is better placed to navigate the P&W engine challenge as it has healthy fleet delivery pipeline with one induction expected each week in FY25E.

In addition, the airline is partly utilizing Rs 192 billion of free cash to buy ATR’s and spare engines to compensate for shortfall in capacity.

We expect revenue compound annual growth rate of 15% for next three years with Ebitdar margin of 23.5%/23.6%/21.8% in FY24E/FY25E/ FY26E (lower in last year due to higher fuel cost).

Retain ‘Accumulate' with a target price of Rs 3,312 (earlier Rs 3,053) by assigning enterprise value/Ebitda multiple of 7.5 times as we roll forward to FY26E.

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