IndiGo Stock Rally: Citi, Jefferies boost targets amid strong air traffic demand

Shares of InterGlobe Aviation, the parent company of IndiGo, have been on an upswing for 6 consecutive sessions, touching Rs 4,543 on February 24. The stock has gained 7 per cent in this period, as global brokerages remain optimistic about its growth prospects. Citi placed IndiGo on a 90-day positive catalyst watch, raising its target price to Rs 5,200 from Rs 5,100. At the same time, Jefferies hiked its target to Rs 5,260, citing the airline’s strong market position and growth potential.

Citi: Rising demand and improving yields drive optimism

Citi analysts underscored the surge in domestic air traffic, particularly due to increased passenger movement to Uttar Pradesh airports for the Maha Kumbh, as a key driver for IndiGo. They expect passenger load factors (PLFs) to improve in Q4FY25, despite seasonal weakness, leading to better yields.

Add Zee Business as a Preferred Source

IndiGo’s dominant market share of over 60 per cent, along with its aggressive capacity expansion, reinforces Citi’s bullish stance. The brokerage maintained a "buy" rating and sees continued revenue growth, supported by higher passenger traffic and a competitive edge over struggling rivals.

Jefferies: Capacity expansion strengthens IndiGo’s lead

Jefferies highlighted IndiGo’s aggressive capacity ramp-up amid competitor constraints, giving it an advantage in yield growth. The brokerage raised its target price to Rs 5,260 from Rs 5,100, emphasizing IndiGo’s "unique, strong franchise." Analysts believe the airline’s lean cost structure and ability to capitalize on increasing demand set it apart.

With fuel prices stabilizing and operating leverage kicking in, Jefferies expects the airline to sustain its profitability despite short-term cost pressures. The firm also noted that IndiGo’s network expansion and fleet additions position it well for long-term growth.

Q3 earnings highlight revenue growth but cost pressures remain

IndiGo reported an 18 per cent YoY decline in net profit to Rs 2,449 crore in Q3FY25, even as revenue surged 14 per cent YoY to Rs 22,111 crore. The airline saw a 12 per cent increase in available seat kilometres (ASK) and a 13.5 per cent rise in revenue passenger kilometres (RPK), reflecting higher capacity and demand.

However, rising costs weighed on margins. Cost per available seat kilometre (CASK), excluding fuel, jumped 23.1 per cent YoY to Rs 3.25, driven by inflation and higher operational expenses. EBITDAR grew 10.7 per cent YoY to Rs 6,059 crore, though its margin slipped 70 basis points to 27.4 per cent.

Outlook: Brokerages see upside despite cost challenges

Despite cost pressures, both Citi and Jefferies remain bullish on IndiGo, citing strong demand trends, dominant market share, and capacity expansion. With the airline well-positioned to capitalize on increasing passenger traffic and competitor struggles, analysts expect further stock gains in the coming quarters.

IndiGo’s ability to maintain its cost advantage while driving yield improvements remains a key factor in sustaining growth, making it a preferred pick among brokerages.