IndiGo share price target: Buy, hold or sell this airline stock? Q2 results preview

Nuvama Institutional Equities on Wednesday said InterGlobe Aviation Ltd, which operates IndiGo, is well placed to use the industry downcycle to convert near-term headwinds into long-term opportunities. It said the airline could replicate its domestic playbook in international markets with better rewards as India grows as a global hub, and retained its 'Buy' rating on the stock with a target price of Rs 5,583 a share.

The brokerage expects IndiGo's EBITDAR for the September quarter of FY27 to rise 72 per cent year-on-year, helped by a 28 per cent increase in yield and a 54 per cent fall in forex costs. It said the expected rise in October fuel costs, estimated at 26 per cent above its Q2 estimate, would be largely covered by the fuel surcharge levy.

Nuvama said the increase in EBITDAR from a low base would be driven by higher fares and lower forex costs, partly offset by a 71 per cent rise in fuel CASK, an 11 per cent increase in CASK excluding fuel and forex, and a 150 basis point decline in passenger load factor. It estimated ASKM would rise 1 per cent year-on-year, in line with management guidance, amid multiple industry headwinds in a seasonally weak demand environment.

The brokerage said annual cost escalations and weak ASKM growth were likely to push CASK excluding fuel and forex up 11 per cent year-on-year. It added that higher yield, in line with management guidance, and lower forex losses from a high base would remain the main drivers of the expected quarterly improvement.

On fuel costs, Nuvama said the IndiGo's stock had corrected 7 per cent after global energy prices rose sharply from the start of September 2026, with Brent up around 17 per cent, leading to concerns over higher fuel costs and pressure on margins. Because of the one-month lag in aviation turbine fuel pricing in India, it estimated IndiGo's fuel CASK for October 2026 would rise sharply by 26 per cent over its Q2 estimate.

It said it was awaiting management guidance on Q3 PRASK (passenger revenue per available seat kilometer) growth, which it expects to offset a substantial part of the cost increase after the fuel surcharge levy. Nuvama noted that growth of more than 25 per cent had been guided for Q2.

For Q3FY27E, Nuvama said scheduled flights of major Indian carriers stand at around 3,56,000 and are set to grow 6 per cent year-on-year, led by 39 per cent growth in international flights, while domestic flights could fall 1 per cent. IndiGo is expected to lag the industry, with its scheduled flights seen rising 1 per cent year-on-year, as domestic flights fall 6 per cent and international flights grow 48 per cent.

The brokerage also said reported data for July and August 2026 was weak, reflecting softer demand. Industry domestic ASKM fell 4 per cent year-on-year, while IndiGo's domestic ASKM (available seat kilometres) rose 2 per cent. Domestic passenger traffic fell 6 per cent for the industry and 3 per cent for IndiGo.

In international operations, industry ASKM declined 9 per cent year-on-year, compared with a 1 per cent fall for IndiGo. International passenger traffic fell 13 per cent for the industry and 8 per cent for IndiGo. Nuvama said this was the main reason for the decline in domestic passenger load factor by around 250 basis points for the industry and around 350 basis points for IndiGo, while international passenger load factor fell around 325 basis points for the industry and around 200 basis points for IndiGo.

Nuvama reiterated its 'Buy' call on IndiGo with a target price of Rs 5,583, saying the airline had outperformed the broader market on traffic trends despite industry weakness. It said the stock is currently trading at 7 times FY28E EV/EBITDAR.