InterGlobe Aviation Ltd (IndiGo) on Thursday fell 3 per cent and was trading at day’s low amid an anti-consensus ‘Sell’ recommendation by Investec on the stock. The foreign brokerage, which sees 30 per cent downside on the stock, expects a weak June quarter for IndiGo, with profit after tax seen falling 13 per cent year-on-year (down 22 per cent QoQ) as lower P&W compensation and soft yields outweigh fuel cost benefits. The recent stock rally is disconnected from the earnings reality, it concluded.
IndiGo shares have 16 ‘Strong Buy’, three ‘Buy’, two ‘Hold’ and just one ‘Strong Sell’ recommendations. Investec said despite a 14 per cent YoY growth in available seat kilometers (ASK), a 22 per cent YoY contraction in revenue per available seat kilometer (RASK) and cost of available seat kilometer (CASK) spread will weigh on earnings.
“With 1Q – a seasonally strong quarter – off to a soft start, FY26 earnings are likely to decline further vs FY25, lacking prior year tailwinds like P&W payouts and Mahakumbh-driven Q4. Yet, the stock continues to rally, seemingly disconnected from earnings reality,” Investec said.
Investec said the recent surge appears driven by macro sentiment and speculation around index inclusion rather than business strength.
“Given the asymmetric risk-reward profile, skewed heavily to the downside, we reiterate our anti-consensus SELL,” it said while suggesting a target price of Rs 4,050 on the stock.
On Thursday, the InterGlobe Aviation scrip was trading 2.89 per cent lower at Rs 5,780.90. Investec’s target suggests 30 per cent downside over this price.
“Despite 11 per cent YoY earnings decline in FY25 from the peak in FY24, and with further pressure expected in FY26 as P&W compensation and Mahakumbh tailwinds subside, the stock has surged 40 per cent over the past year,” Investec said.
It felt rally looked increasingly disconnected from earnings fundamentals, likely driven by speculation around potential index inclusion and broader macro sentiment, rather than underlying business strength.
“The recent momentum seems more reflective of market hype than financial reality. With the risk-reward profile heavily skewed to the downside, we maintain our contrarian SELL recommendation,” Investec said.
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