IndiGo’s Q3FY20 results were ahead of expectations — the demand environment improved in November-December, post a soft October, which led to the earnings beat. The revenues grew ~25% y-o-y due to an improvement in yields (+10 q-o-q) and higher ancillary revenues (+29% y-o-y). We roll forward and set a December 2021 TP of Rs 1,750 (@6x EV/Ebitdar). Maintain ‘buy’.
Net revenue growth of ~25% was driven by ASKM growth of +19% y-o-y and higher yields (+10% q-o-q, flat y-o-y) in a seasonally strong quarter. The Ebitdar margins were ahead of estimates at 18.2% due to lower fuel costs and forex gains of Rs 120 crore. The engine maintenance costs are now settling at ~Rs 1,600 crore/quarter and are expected to normalise once the older CEO planes are phased out over the next 2 years.
IndiGo is guiding for ASK growth of 20% through FY21. Pricing in the domestic segment has held up by the non metro to non metro routes, while that in metros has been impacted by competition.
