IndiGo shares jump 3% despite Q2 loss; Nomura, HSBC raise targets on pricing power, margins

Shares of InterGlobe Aviation Ltd., which operates IndiGo, were trading over 3% higher on Friday, October 30, after brokerages maintained their positive stance on the airline following its September quarter results. Analysts highlighted strong yields and pricing power, while flagging elevated fuel costs and the sensitivity of earnings to input prices.

Nomura has maintained its ‘Buy’ rating on IndiGo and raised its price target to ₹6,200 from its earlier level. The brokerage said the airline’s Q2 performance demonstrated its pricing power amid robust demand and cost inflation. EBITDA came in above consensus estimates, supported by stronger-than-expected passenger revenue per available seat kilometre (PRASK) and yields.

Nomura expects margins to improve sequentially in Q3 despite higher fuel prices, adding that the airline could recover 80–90% of cost increases through pricing. It has raised its FY27 and FY28 EBITDA estimates by 11% and 3%, respectively.

HSBC has also retained its ‘Buy’ rating on IndiGo, with a price target of ₹5,545. The brokerage said Q2 EBITDA was 25% above its estimates, driven by stronger yields and lower fuel costs.

The airline has guided for PRASK growth of over 25% in Q3 and FY27, alongside capacity expansion in the low-single digits. HSBC expects ex-fuel unit costs to increase by high-single to low-double digits and said the airline’s focus on ancillary and cargo revenue would remain important.

Jefferies has maintained its ‘Buy’ rating on IndiGo, with a price target of ₹5,650. The brokerage described the Q2 performance as soft, but broadly in line with expectations. Strong yield growth of 34% year-on-year partly offset higher fuel and other costs.

Jefferies noted that management continues to prioritise pricing, with low-single-digit capacity growth and PRASK growth of over 25% guided for Q3. While management addressed concerns around yields and non-fuel costs, the brokerage cautioned that earnings remain sensitive to fuel prices. It has cut its FY27 and FY28–FY29 earnings per share estimates by 9% and 2%, respectively.

IndiGo Q2 results

InterGlobe Aviation reported a net loss of ₹1,879 crore for the September quarter, narrowing from a loss of ₹2,581.7 crore in the year-ago period.

Revenue rose 25.9% year-on-year to ₹23,364 crore from ₹18,555.3 crore.

EBITDAR, or earnings before interest, tax, depreciation, amortisation and rent, increased to ₹2,460 crore from ₹1,114.3 crore in the corresponding quarter last year. EBITDAR margin expanded to 10.5% from 6%.

The airline’s foreign exchange loss narrowed to ₹1,333 crore from ₹2,892 crore in the year-ago quarter.