IndiGo soars 13% as Q4 earnings beat Street expectation

Shares of InterGlobe Aviation-run IndiGo airline surged as much as 12.6 per cent to Rs 1,064.95 on the BSE on Wednesday after the airline' March quarter numbers beat Street expectations. Besides, analysts' optimism around strong recovery by financial year 2021-22 fuelled buying rally in the stock.

At 10:38 am, the stock was trading at Rs 1,025.55, up 8.46 per cent on the BSE, as against 416 points, or 1.23 per cent, gain in the benchmark S&P BSE Sensex at 34,241 level. A combined 7.7 million shares have changed hands on the counter on the NSE and BSE till the time of writing of this report. 

The Gurgaon-based airline on Tuesday reported a net loss of Rs 870.8 crore, compared to a net profit of Rs 589.6 crore in the year-ago quarter (Q4FY19), and Rs 496 crore in the December quarter of FY20. For the full fiscal year, the low cost airline’s net loss stood at Rs 233.7 crore.

The number was better than what was expected by Elara Capital (net loss of Rs 2604.7 crore), HSBC (loss of Rs 1,015.4 crore), and Edelweiss Securities (loss of Rs 995.4 crore).

The loss before tax, however, was at Rs 1,289.8 crore compared to profit of Rs 626.1 crore in Q4FY19.

The revenue from operations stood at Rs 8,299.1 crore, up 5.27 per cent year-on-yar (YoY), from Rs 7,883.3 crore earned in Q4FY19. Sequentially, the revenue dropped 16.4 per cent from Rs 9,931.7 crore.

Analysts at Kotak Institutional Equities expected the revenue to come in at Rs 7,345.2 crore.

"During the quarter, the company recognised around Rs 270 crore in additional accruals toward supplementary rentals and repairs (over and above Rs 620 crore recognised up to 3QFY20, totaling Rs 890 crore for FY20)... The company recorded forex loss of Rs 1,050 crore (v/s our estimate of Rs 940 crore), resulting in reported PAT loss of Rs 871 crore, in line with estimates," noted analysts at Motilal Oswal Financial Services. They have 'Neutral' rating in the stock with a target price of Rs 1,080.

At the end of the March quarter, the airline has free cash reserves of Rs 8,928.1 crore, compared to Rs 6,079.6 crore in Q4FY19. The restricted cash reserves stand at Rs 11,448.8 crore, up 24 per cent YoY, from Rs 9,228.5 crore.

"With Rs 6,500 crore of net cash at the end of FY20, Indigo has the wherewithal to survive the on-going crises. However, the current turmoil may result in other carriers being forced to curtail operations fully or partly; it would also impact their ability to grow and maintain market-share in the recovery period. As a result, we expect Indigo to continue growing faster than the industry in FY22," said analysts at IIFL Securities in a results review note. They have 'Add' rating on the stock with a target price of Rs 1,050.

Those at Kotak Institutional Equities said that Steep decline in crude prices is a positive for the airline industry. "Indigo’s cash reserves of Rs 8900 crore of free cash and Rs 11,500 crore of restricted cash (note restricted cash can be drawn in periods of non-utilization of leased aircraft) provide comfort," they add.

Foreign brokerage Credit Suisse maintains 'Outperform' rating on the stock on hopes that the airline would turn profitable by FY22. 

"Company has a strong balance which gives us the confidence that the airline would survive when peers would struggle during the crisis," they noted in their result review report.