Our target price of Rs6,500 for IndiGo is based on 2.8x Sep’26E EV/Sales. The 2.8x target multiple is set at a 20% premium to IndiGo’s 5-year average trading multiple of around 2.3x, reflecting strong demand trends, healthy pricing environment, steady market share and significant route expansion. 2.8x is at a premium to the broad range of 0.6-1.1x at which global LCCs (Low Cost Carriers) trade. The premium to LCC peers reflects IndiGo's dominance in its market (~64% market share in domestic aviation).

Key downside risks that could impede the stock from reaching our TP include: 1) disruption in operations due to grounded aircraft and sustained engine issues, 2) escalation in competitive intensity due to expansion by Air India (including Vistara) and/or expansion by new entrants/current airline operators; 3) decline in overall demand due to weaker sentiment; 4) risks to international operations due to an uncertain geopolitical environment; 5) higher cost pressures due to depreciation in INR vs USD and higher ATF prices; and 6) excess supply of shares in the market over the next five years (sale of shares held by Mr. Gangwal/associated persons).