Buy InterGlobe Aviation Ltd For Target Rs1, 912 – ICICI Securities

Expect steady Q4; business momentum remains strong

We expect IndiGo to register Rs3bn/Rs23bn PBT (ex-forex impact) in Q4FY23/FY23.
Profits are highly sensitive to yields which is the key upside/downside risk to our
estimates. However, IndiGo remains well placed to benefit from strong systemic
demand and its leading competitive positioning. IndiGo remains focused on growth
(>15% ASK growth in FY24, doubling the fleet by 2030) and internationalisation
(increase ASK mix to 30% over next two years from 23% in 9MFY23). These goals
are intended to be achieved within the already existing business framework (low
cost, hassle-free service, on-time operations with uniform fleet).

* Q4FY23 operating highlights: We expect Q4FY23 to be a good quarter for airlines
after factoring in the expected seasonal weakness. Basis Jan/Feb and daily trends of
March, we expect domestic passenger (pax) of ~136mn and international pax of 24mn
in Q4FY23 for all Indian airlines put together. We expect IndiGo to maintain 56%/36%
market share within the same. In line with the company guidance, we expect available
seat kilometre (ASK) of 113bn for IndiGo in FY23, implying 30bn in Q4FY23. Basis
PLF trends (83% in Jan and 87% in Feb’23), we expect total domestic passengers of
~20mn for IndiGo in Q4FY23. We project 2.4mn international passengers for IndiGo
in Q4FY23 compared to 2.3mn in Q3FY23.

* Expect Rs3bn PBT in Q4FY23 after adjusting for forex. Against average 6%
sequential decline seen between FY16-19, we have assumed 11% decline in Q4FY23
to adequately factor in the high base of Q3FY23. We factor ancillary revenue to be
12% of overall revenue in Q4FY23 versus 11% in 9MFY23. Fuel CASK is expected
to decline by 2% QoQ in Q4FY23 (average ATF was down 8.6% in Q4FY23) while
CASK ex fuel is expected to increase marginally from Rs2.64 in Q3FY23 to Rs2.69 in
* Daily total domestic passenger trend largely remains strong. As against monthly
trend of average daily PAX of 404k and 431k for the months of Jan’23 and Feb’23,
Mar’23 daily pax count stood at 420k and Q4FY23 average daily stood at 418k.
Average daily pax count has picked up in Apr’23, as Apr’23-TD average PAX count
stands at 422k. Daily departures in Apr’23-TD have largely remained flat as a result
of which pax per departure has increased from 141 in Mar’23 to 143 in Apr’23-TD.


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