Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
Financials & Valuations (INR b)
EPS Gr. (%)
Div. Yield (%)
FCF Yield (%)
512.2 / 6.7
1541 / 765
30 October 2020
2QFY21 Results Update | Sector: Aviation
TP: INR1,350 (+2%)
Volume recovery remains key to earnings
INDIGO reported better-than-estimated ASK/RPK growth in 2QFY21, while yield
was lower than estimates. This resulted in-line revenue for 2QFY21.
INDIGO’s cash burn reduced to INR250m in 2QFY21 (from ~INR300m as of 30
Jun’20) as the company undertook cost reduction initiatives for leasing, payroll
and other costs (like non-aircraft rentals, IT costs, etc.). Relatively smaller increase
in supplementary rentals to capacity with further reduction in employee cost and
huge forex gain led to beat on our EBITDA est. at INR2.1b.
Going forward, employee expenses are likely to increase (it stood at INR6.9b in
2QFY21, down ~40% YoY), as capacity ramp-up from here on.
For 3QFY21, INDIGO has given capacity guidance (ASK) at ~60% YoY. Currently, the
company is operating at ~58% of last year’s domestic capacity, with International
flights running at 20% capacity currently. Furthermore, capacity is expected to
reach ~80% by end-CY20 or early-CY21.
Nevertheless, as per daily passenger data published by MoCA, domestic passenger
demand stands at ~40% of the last year in Oct’20.
In lieu of the above, even INDIGO has highlighted headwinds over increase in PLFs
from current levels as more capacity is deployed in the domestic market. Delay in
recovery of PLFs could mean higher operating costs for airlines. This would also
pressurize yields (that are on the higher end since couple of quarters).
Despite the current state of uncertainty in the industry, INDIGO trades close to
pre-COVID levels (mere -10% v/s Feb’20 level). We continue to believe in various
pre-emptive measures that are undertaken by INDIGO to focus and strengthen
each of its business verticals and to come out strong from the current crisis.
We remain Neutral on the stock, and await further clarity on festive season
demand over Nov’20-Jan’21.
Cash burn at INR250m per day to reduce further
Shareholding pattern (%)
FII Includes depository receipts
During 2QFY21, ASK was higher than our est. at 8.9b (v/s our est. of 7.3b,
-63% YoY). INDIGO gradually deployed capacities during 2QFY21, with
capacity at 47% YoY at end-Sep’20.
PLFs were in line with est. at 65%, thus RPK came in at 5.8b (v/s est. INR4.7b,
-71% YoY). Yield stood at INR3.83/RPK (+9% YoY, -15% QoQ).
Thus, revenue stood in line with est. at INR27.4b (-66% YoY). RASK was lower
YoY/QoQ, owing to lower PLFs, which tanked due to various state-led travel
advisories and imposition/extension of further lockdowns.
INDIGO reported EBITDA level profit of INR2.1b (v/s loss of INR5.8b as per
our est., INR0.2b in 2QFY20 and INR16.1b in 1QFY21).
Forex gains stood at INR5.1b.
Reported PAT came in at a loss of INR12b (v/s loss of INR18.2b as per our
est., INR10.7b in 2QFY21 and INR28.5b in 1QFY21).
Sarfraz Bhimani - Research Analyst
Swarnendu Bhushan- Research Analyst
research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P
Investors are advised to refer through important disclosures made at the last page of the Research Report.