IndiGo's record Q1 performance fails to excite investors on another volatile day on Dalal Street

IndiGo shares were under pressure on Thursday amid broad-based weakness on Dalal Street, a day after the airline staged a strong quarterly performance with a record net profit that beat analysts' estimates by a wide margin. The stock of InterGlobe Aviation — which owns and operates the IndiGo airline — declined by as much as Rs 104.7 or 4.1 per cent to Rs 2,461.1 apiece on BSE.

The company said the net profit reflected its strong operational performance, execution of strategy and favourable market conditions.

IndiGo Q1 results

After market hours on Wednesday, InterGlobe Aviation reported a consolidated net profit of Rs 3,090.6 crore for the quarter ended June as against a net loss of Rs 1,064.3 crore for the corresponding period a year ago. 

The private sector airline's revenue came in at Rs 16,683.1 crore for the first quarter of the current financial year, marking growth of 29.8 per cent on a year-on-year basis, according to a regulatory filing. 

The company's margin — a key measure of profitability — stood at 31.2 per cent for the June quarter as against 20.9 per cent for the January-March period.

According to Zee Business research, IndiGo's quarterly net profit was estimated at Rs 1,320 crore, revenue at Rs 15,200 crore and margin at 25.01 per cent.

The company staged a strong operational performance, building on the positive momentum in the past two quarters.

IndiGo's passenger ticket revenue increased 30.8 per cent to Rs 14,995.6 crore for the three-month period, according to a statement. The company said its capacity increased by 18.8 per cent to 32.7 billion and the number of passengers grew 30.1 per cent to 26.2 million in the June quarter. 

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The airline's fuel cost decreased 12.7 per cent to Rs 5,228.1 crore for the three-month period. 

What analysts say

According to Citi, which maintained a 'buy' rating on the airline stock and raised its target price by Rs 500 to Rs 3,400, the company's strong performance was driven by its strong yield as well as growth in available seat kilometers (ASK). 

The brokerage's target price implies an upside of 32.5 per cent from Wednesday's closing price. 

Jefferies maintained an 'underperform' call on IndiGo but raised its target price for the stock by Rs 120 to Rs 2,070 apiece. The brokerage pointed out that factors such as strong pricing, which benefitted the airline in the June quarter, appear to be reversing in the next three months. 

Domestic equity benchmarks Sensex and Nifty struggled below the flatline amid market-wide weakness on Thursday, a day after the headline indices suffered their steepest percentage losses in two weeks.  

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