On Monday, JPMorgan adjusted its outlook on InterGlobe Aviation Ltd. (INDIGO:IN), reducing the price target to INR 4,800 from the previous INR 4,950. The firm has retained its Overweight rating on the stock, despite the company's second-quarter financial performance falling short of expectations.
InterGlobe Aviation, which operates the airline IndiGo, reported a substantial quarterly loss that was significantly higher than anticipated. The company's loss of Rs 9.9 billion was notably larger than JPMorgan's estimate of a Rs 2.2 billion loss. This discrepancy was attributed to unexpectedly high non-fuel costs.
The analyst noted that the cost per available seat kilometer (CASK) excluding fuel remained high due to a combination of factors, including a large number of aircraft groundings and increased airport charges. While the third quarter is expected to bring some seasonal improvements in profitability, non-fuel costs are anticipated to continue impacting the airline's earnings in the coming quarters.
JPMorgan has revised its forecast for the company's financial spreads, now expecting a spread of Rs 0.37 for the fiscal year 2025, down from the earlier Rs 0.62 estimate. However, the projections for fiscal years 2026 and 2027 remain largely unchanged. The earnings per share (EPS) estimate for fiscal year 2025 has been cut by 39%, with a more modest reduction of 2-7% for the following two years.
The updated price target of INR 4,800 reflects these adjustments, as JPMorgan continues to maintain an Overweight stance on InterGlobe Aviation shares.
InvestingPro Insights
While InterGlobe Aviation faces challenges in its recent quarterly performance, InvestingPro data provides additional context to the company's financial position. Despite the recent setback, IndiGo has demonstrated strong revenue growth, with a 21.57% increase in the last twelve months as of Q2 2025, reaching $8.81 billion. This growth aligns with JPMorgan's maintained Overweight rating, suggesting potential for future improvement.
InvestingPro Tips highlight that InterGlobe Aviation is a prominent player in the Passenger Airlines industry and has been profitable over the last twelve months. This profitability is reflected in the company's P/E ratio of 23.28, which, while high relative to near-term earnings growth, may indicate investor confidence in the airline's long-term prospects.
The company's strong performance is further evidenced by its impressive 62.49% price total return over the past year, significantly outperforming many of its peers. This aligns with JPMorgan's optimistic outlook, despite the recent quarterly loss.
It's worth noting that InvestingPro offers 7 additional tips for InterGlobe Aviation, providing investors with a more comprehensive analysis of the company's financial health and market position. These insights could be particularly valuable as the airline navigates the challenges highlighted in JPMorgan's report.
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