IndiGo shares rise 2% after Q2 losses narrow. What are Jefferies and other brokerages saying?

Shares of IndiGo, India’s leading airline by market share, gained 2% to hit a day's high of Rs 4,762 on the BSE on Friday after the company reported a narrower Q2 net loss of Rs 1,879 crore, compared with Rs 2,582 crore in the year-ago quarter. However, the loss widened from Rs 238 crore in the preceding June quarter.

Revenue from operations, meanwhile, increased 26% year-on-year (YoY) to Rs 23,364 crore. Profitability remained under pressure due to elevated fuel costs and rupee depreciation. Looking ahead, IndiGo expects capacity growth to return in the December quarter. The airline guided for an increase in available seat kilometres (ASKM) in the low single digits during Q3 FY27 compared with the corresponding period last year.

Also Read | Trent soars 7% after Q2 results. Here’s why Elara Capital, Nuvama remain bullish on the Tata stock

Should you buy IndiGo shares?

Jefferies retained its 'Buy' rating on IndiGo but lowered its target price to Rs 5,650 per share. The brokerage said the September quarter performance was soft, as expected, with a strong 34% YoY increase in yields partly offsetting higher fuel and other costs.

Management addressed concerns around near-term yields and costs excluding fuel and foreign exchange. However, earnings remain sensitive to jet fuel prices. Jefferies cut its FY27 EPS estimate by 9% and its FY28 and FY29 estimates by 2%, while retaining its 'Buy' rating.

Capacity additions are expected to pick up slightly in the second half of FY27 after remaining flat in Q2. However, the international mix is likely to remain weaker in Q3 as IndiGo exits wide-body operations following the return of damp-leased aircraft.

Also Read | Suzlon Energy shares fall 4% as Nuvama, others slash target prices after Q2 margins disappoint. What lies ahead?

Domestic brokerage Nuvama Institutional Equities marginally trimmed its target price to Rs 5,435, while retaining its 'Buy' rating. It believes IndiGo is well placed to convert near-term headwinds into lucrative long-term opportunities by replicating its domestic playbook internationally and benefiting from better spreads as India grows as a global hub.

“We are cutting FY27/28E EBITDAR by 12%/3% as we raise CASK forecasts driven by higher fuel, weak INR while marginally tapering our ASKM growth assumptions,” the brokerage said in a note.

IndiGo continued expanding its fleet during the September quarter, adding a net 10 passenger aircraft. The airline operated 442 aircraft as of September 30, comprising 26 Airbus A320ceos, 174 A320neos, 186 A321neos, four A321XLRs, 44 ATRs, three A321 freighters and five Boeing 787 aircraft under damp-lease arrangements.

IndiGo operated a peak of 2,020 daily flights during the quarter, including non-scheduled services. Its network covered 97 domestic destinations and 36 international destinations. The airline reported an on-time performance of 91.3% across 10 major airports, while its flight cancellation rate stood at 0.35%.

IndiGo reported a total cash balance of Rs 52,685 crore as of September 30, comprising free cash of Rs 39,929 crore and restricted cash of Rs 12,756 crore. Its total debt, including capitalised operating lease liabilities, stood at Rs 87,303 crore.

Disclaimer: This article has been written by Veer Sharma, who is not a SEBI-registered Research Analyst or an Investment Adviser. Veer Sharma and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.