- Target
- ₹6,580
- At report
- ₹5,166+27% printed
- Vs our close
- +35.1%
Motilal Oswal reiterates BUY on InterGlobe Aviation (INDIGO), framing the next leg of value creation around three structural shifts: internationalization of the network, rising fleet ownership/vertical integration, and reduced earnings volatility via strategic initiatives including the new CFM engine partnership and higher forex hedging. The broker expects a 13%/47% revenue/EBITDAR CAGR over FY26-28 and values the stock at 10x FY28E EBITDAR for its unchanged TP of INR6,580, arguing the market underappreciates INDIGO's strong underlying cash generation (~INR424bn cumulative FCFF over five years) obscured by forex-driven accounting volatility in reported PAT.
- India remains a highly underpenetrated outbound travel market (passport penetration ~9% vs ~60% in the US) with a 35.4m global diaspora, positioning INDIGO's ~67% domestic market share to feed growing international demand
- New CFM International MoU for 1,000+ LEAP-1A engines to power 510 A320neo-family aircraft (largest LEAP order in CFM history) de-risks fleet induction by addressing engine availability, MRO capacity and spare-parts access, alongside a domestic engine MRO facility
- Fleet ownership rising from ~22% currently (96 owned/finance-leased aircraft) toward a 30-40% target by FY30, expected to internalize lessor economics, reduce recurring lease costs and lower FX volatility via the GIFT City leasing platform
- Cumulative FCFF of ~INR424bn (~423bn per cash-flow exhibit) generated over the last five years despite a reported FY26 net loss of ~INR25bn, as forex losses are largely non-cash mark-to-market revaluations of USD lease liabilities rather than economic outflows
- Hedge coverage plan to rise from ~15% currently to ~33% by FY27-28, reducing FX sensitivity from ~INR9bn to ~INR7.1bn in forex impact per INR1 rupee depreciation
- Broker expects INDIGO to deliver a revenue/EBITDAR CAGR of 13%/47% over FY26-28, reiterating BUY with TP of INR6,580 based on 10x FY28E EBITDAR
- Reported earnings remain volatile due to forex revaluation of large USD-denominated lease and maintenance liabilities; every INR1 depreciation vs USD can result in ~INR8-9bn of forex losses currently
- Global narrow-body engine ecosystem remains stressed following the Pratt & Whitney GTF crisis, with ~720 aircraft grounded globally (~38% of aircraft on ground) as of May'26 and extended MRO turnaround times
- Greater fleet ownership increases capital intensity and balance-sheet commitments, initially depressing asset turns and potentially limiting near-term RoCE expansion
- ~900 aircraft remain to be delivered against the orderbook, exposing the growth plan to delivery and supply-chain execution risk
- Gradual normalization of international operations and easing of Pratt & Whitney-related groundings
- A321XLR-led international network expansion and doubling of A350 order (30 to 60 aircraft) enabling long-haul routes to Europe, North America, Australia and East Africa
- Recapture of Gulf-hub-routed international traffic (~20% of Indian international traffic currently via Dubai/Doha/Abu Dhabi) as INDIGO's international capacity share rises to 40% of total capacity by FY30
- Continued ramp of BluChip loyalty program (11m+ members within 20 months of launch) and codeshare network (103 destinations via 13 partner airlines)
| Broker estimates | Unit | FY26 | FY27E | FY28E |
|---|---|---|---|---|
| Sales | ₹ b | 849.6 | 1,022.5 | 1,093.9 |
| EBITDA | ₹ b | 118.4 | 196.1 | 268.8 |
| EBITDAR | ₹ b | 139.3 | 220.6 | 300.4 |
| Net Profit | ₹ b | -25 | 54 | 86.2 |
| EPS | ₹ | -31.5 | 139.6 | 223 |
| BV/Share | ₹ | 167.8 | 308.2 | 520.5 |
| RoE | % | -15.5 | 59 | 54.1 |
| RoCE | % | 7.8 | 16.2 | 21 |
| P/E | x | -163.9 | 37 | 23.2 |
| P/BV | x | 30.8 | 16.8 | 9.9 |
| Adj. EV/EBITDAR | x | 17.9 | 11.4 | 8.2 |
| FCF Yield | % | 10.6 | -0.4 | 3.8 |
Valuation: 10x FY28E EBITDAR. Broker reiterates BUY with an unchanged TP of INR6,580, valuing INDIGO at 10x FY28E EBITDAR of INR300.4bn, reflecting expected reduction in earnings volatility as internationalization, fleet ownership and hedging initiatives mature. This is a thematic strategy update rather than an estimate-revision note; the report does not present an explicit change-in-estimates table, and the TP of INR6,580 is reiterated unchanged.
Extraction note: This is a strategic/thematic company update (not a quarterly results note), so no 'quarter' highlights section applies. Financial summary box in the header is in INR million per the report's own label 'Financials & Valuations (INR m)' but the values match the detailed standalone …