Two reasons why IndiGo stock was cut to 'Reduce' at JM Financial
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JM Financial downgraded the stock of InterGlobe Aviation (IndiGo) to 'Reduce', citing that an increased fuel cost and weak rupee are expected to "adversely" impact its second-quarter earnings.
The brokerage cut the rating to 'Reduce' from 'Hold' with a target price of ₹5,570 per share, a downside of 2.8 per cent from Friday's close. Indigo Airlines is expected to report a muted second-quarter performance, driven by higher aviation turbine fuel (ATF) prices, a weaker rupee, and a seasonally subdued period, JM Financial said.
Total available seat kilometres (ASK) for Indigo grew 9 per cent and 6 per cent year-on-year (Y-o-Y) in July and August 2025, respectively, outperforming the overall industry growth of 1 per cent each month. The airline’s overall ASK growth for the quarter is projected at 8 per cent, in line with management guidance, while passenger yield (PRASK) is expected to remain flat Y-o-Y, JM Financial said.
ATF prices rose to ₹90,900 per kiloliter in the second quarter from ₹86,000 per kiloliter in the June quarter, up 5.7 per cent quarter-on-quarter (Q-o-Q), driven by higher crude oil costs. Profit before tax per ASK is estimated at negative ₹0.65, implying a net loss of ₹2,680 crore.
Indigo’s domestic market share fell 100 basis points month-on-month to 64.2 per cent in August, while international share rose 56 basis points to 27.4 per cent, JM Financial said. Despite short-term challenges, the airline remains focused on capacity expansion, and analysts maintain a constructive long-term view.
Earnings estimates have been revised down by 14 per cent, 11 per cent, and 1 per cent for near-term quarters, reflecting a weaker rupee, though cost pressures are expected to be passed on to passengers over time.
Given its dominant market position and strong execution, the stock's price-to-earnings multiple is pegged at a long-term average of 20 times (x), though recent gains imply potential near-term downside.
IndiGo Q1FY26 results
In the June quarter, InterGlobe Aviation reported a 20.25 per cent Y-o-Y decline in consolidated net profit to ₹2,176.3 crore, down from ₹2,728.8 crore reported in Q1FY25.
The company’s revenue from operations stood at ₹20,496.3 crore in Q1FY26, up 4.73 per cent Y-o-Y from ₹19,570.7 crore. On the flip side, total expenses in Q1FY26 rose 10.2 per cent Y-o-Y to ₹19,231.9 crore, up from ₹17,444.9 crore.
IndiGo's share price history
The airline's stock rose as much as 1.56 per cent during the day to ₹5,824 per share. The stock pared gains to trade 0.7 per cent higher at ₹5,778 apiece, compared to a 0.37 per cent decline in Nifty 50 as of 10:18 AM.
Shares of the company rose for the third straight session. The counter has risen 26 per cent this year, compared to a 6.5 per cent advance in the benchmark Nifty 50. IndiGo has a total market capitalisation of ₹2.2 trillion.
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