IndiGo share price crashes a whopping 11% after steep fall in Q1 net profit

InterGlobe Aviation, which runs country's largest domestic carrier IndiGo, took a severe beating on Dalal Street. The stock tanked a whopping 11 per cent after InterGlobe reported a steep 96.6 per cent fall in net profit to Rs 27.8 crore in June quarter, owing to adverse impact of foreign exchange, high fuel prices, lower yields and higher maintenance cost.

The Gurugram-based budget carrier had posted a net profit of Rs 811.10 crore in the same quarter last year.

Reacting to poor earnings, IndiGo share price slipped as much as 11.26 per cent to Rs 891.10 on the BSE.

Kotak Institutional Equities though maintained its 'buy' rating on the stock, but target price to Rs 1,220 from Rs 1,430 earlier.

"Indigo reported another set of weak results with adjusted EBITDAR of Rs 12.8 bn coming in 12 per cent below estimates. While the impact of crude prices and weaker rupee was well known, the results missed estimates due to lower RPKs and lower yields," said Kotak in a results review report.

"Continued weakness in yields, particularly in the face of rising costs is a negative and drives a sharp 30% cut in FY2019E EPS. Lower yield assumptions also drive a 14-18 per cent cut in FY2020-21E EPS and lead to a revised TP of

Rs 1,220 based on 14X June 2020E P/E. BUY stays as pricing discipline or consolidation or both should lead to normalized margins over the medium term," the brokerage added.  

"The profit during the quarter was primarily impacted by rupee depreciation, increase in fuel prices, continuous pressure on yields and increase in maintenance cost," said Rahul Bhatia, co-founder and interim chief executive officer, IndiGo, during the post-earnings analysts call.

Total expenses for the quarter jumped by 40.5 per cent year-on-year to Rs 678.70 crore, while fuel cost shot up by 54.5 per cent to 271.56 crore, from Rs 175.92 crore in the year-ago period.

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Besides, yields or average ticket price dropped 5.4 per cent to Rs 3.62 per km in the June quarter, against Rs 3.83 per km in the same period last year.

"The current revenue environment continues to remain weak, particularly in the 0-15 days booking window. The fares continue to be lowest in the quarter compared to the same period last year. We don't believe that these type of fares are sustainable, especially given increase in input costs," said Bhatia.

The load factor surged 1.3 per cent to 89.3 per cent in the quarter, against 88 per cent in the year-ago period.

"Clearly, with the industry load factor in the high 80-90 per cent range, the industry is turning with passenger demand at the current fare levels, but we have no choice but to keep our fares competitive," he added.

The airline's total debt in the books was Rs 2,500 crore at the end of June quarter, while the cash balance was Rs 13,200 crore, comprising Rs 6,100 crore of free cash and Rs 7,100 crore of restricted cash, as per the airline.