InterGlobe Aviation: MOFSL says softer Brent oil bodes well for IndiGo, 'Buy' stocks

Motilal Oswal Financial Services Ltd (MOFSL) has upgraded its rating on InterGlobe Aviation, operating as IndiGo, from 'Hold' to 'Buy'. The brokerage cited favourable domestic demand and a decline in Brent crude prices amid geopolitical instability, as key positive factors for the airline.

MOFSL has set a target price of Rs 6,550 for IndiGo, based on a 10 times FY27 EV/Ebitdar valuation. Currently, IndiGo's stock trades at a PE ratio of 20 times FY26 EPS and 9.7 times FY26 EV/Ebitda, reflecting its robust market position and growth potential, the brokerage said.

Forecasting a compound annual growth rate (CAGR) of 28 per cent for Ebitda and 38 per cent for PAT during FY25-27, MOFSL highlights the airline's financial resilience. The brokerage also adjusted its Brent crude assumption for FY26-27 to $65 per barrel, expecting the easing of OPEC+ production cuts.

For IndiGo, aircraft fuel represents approximately 40 per cent of total expenses. Therefore, softer crude prices are projected to enhance profitability, particularly as global oil supply is expected to surpass demand, widening the supply-demand gap.

According to MOFSL, "IndiGo has been on an upward trajectory after Covid, gaining market share in the domestic market, expanding its international and cargo business, adding new destinations/routes, signing codeshare agreements, and procuring delivery of aircraft from OEMs. These factors have helped the company maintain profitability for the past two years and will continue to drive its performance in the coming years."

Under the leadership of Pieter Elbers, who became CEO in September 2022, IndiGo has adopted a new operational strategy that has bolstered its competitive edge against global airlines. "His wealth of experience has not only helped IndiGo compete with global majors but also consistently increased IndiGo's market share in the domestic market," MOFSL stated.

IndiGo serves over 100 million passengers and adds one aircraft on average every week. The company's international share has expanded to approximately 28% in FY25 in terms of Available Seat Kilometers (ASK), backed by strategic airline partnerships.

Furthermore, IndiGo's focus on global presence through loyalty programmes and proactive brand-building efforts, along with continuously refined schedules, enhances its reliability and appeal to international travellers. These strategies are expected to sustain the airline’s growth trajectory.