Prabhudas Lilladher has issued a detailed research report on InterGlobe Aviation, indicating a cautious outlook for the airline amidst recent operational challenges. The firm has downgraded its rating from buy to hold and revised its target price downward to Rs 5,236, citing concerns related to the implementation of Flight Duty Time Limitation (FDTL) norms and pilot shortages.
The report highlights that EBITDAR estimates have been reduced by 13%, 8%, and 12% for FY26E, FY27E, and FY28E respectively. These adjustments reflect the expected impact of stricter regulatory norms combined with industry-wide pilot supply constraints. As of FY25, the airline's pilot-to-aircraft ratio stood at 13.8x, with average salary per pilot around Rs 6.8 million, which adds pressure to employee costs amid a backdrop of industry-wide pilot license issuance of 1,213 in 2024.
Operational and Financial Outlook
Given these factors, analysts expect employee costs per ASKM to increase from Rs 0.51 to Rs 0.62 by FY28, leading to a 4-12% reduction in capacity growth projections. While sales are expected to grow at a compound annual rate of 9%, the added cost burdens and capacity limitations due to new norms are believed to pose significant structural challenges.
"The implementation of FDTL norms will likely hinder the airline’s cost efficiency and growth prospects, requiring cautious stock assessment," said Prabhudas Lilladader.
Overall, the firm anticipates a revenue CAGR of 9% and EBITDAR CAGR of 7% over the forecast period. The stock’s valuation multiple has been adjusted to reflect these considerations, leading to the current judgment of holding with a lower target price.
This cautious stance suggests that investors should monitor regulatory developments and industry hiring trends closely as the airline navigates these operational headwinds.
