 "Food and grocery delivery firm Swiggy's early moves stir pot in food, qcom")
SoftBank-backed food and grocery delivery firm Swiggy’s shares gained 5.6 per cent in the morning session on Tuesday, reaching an intraday high of Rs 567.8 per share on the BSE. However, the stock closed 1.13 per cent higher at Rs 543.55 per share. In comparison, the S&P BSE Sensex finished flat at 81,510.05.
The surge in Swiggy’s stock came after global brokerage CLSA initiated coverage on the company with an ‘outperform’ rating and set a 12-month price target of Rs 708 per share. This represents a 31.7 per cent upside from the previous close of Rs 537.5 per share on the BSE.
According to the brokerage, Swiggy is one of India’s most innovative companies and an early mover in both food delivery and quick commerce in the country.
“Swiggy has significant growth potential as it addresses a large total addressable market for food delivery and quick commerce. We also expect Swiggy’s execution to improve with accelerating growth and increasing profitability. We foresee Indian quick commerce growing 6x from 2023-24 (FY24) to 2026-27 (FY27), with Swiggy positioned as one of the largest beneficiaries,” CLSA said.
However, it added that Swiggy will likely continue to lag behind Zomato, but this gap is reflected in the stock price.
Swiggy shares were listed on November 13, with a premium of Rs 22, or 5.6 per cent, on the BSE at Rs 412 per share, compared to its issue price of Rs 390 per share. Similarly, on the National Stock Exchange, Swiggy shares opened at Rs 420, a gain of Rs 30, or 7.6 per cent, from its initial public offering price.
More From This Section
Recently, UBS initiated coverage on the stock with a ‘buy’ rating, citing a major valuation discount compared to rival Zomato. UBS set a 12-month price target of Rs 515.
Analysts at UBS believe Swiggy is well-positioned to benefit from the rapid growth in India’s food delivery and quick commerce markets, with an estimated gross merchandise value and revenue compound annual growth rate of 35 per cent and 29 per cent, respectively, over FY24-27.
According to Bloomberg, of the seven analysts polled in December who have rated the stock, two are bullish, two are neutral, and three are bearish. The average one-year target price is Rs 508.5.
With early signs of market share stabilising in food delivery and recent investments and strategic changes in quick commerce likely leading to volume growth and margin recovery, analysts believe the discount to Zomato should narrow over time.
In its 2024-25 (FY25) second quarter (Q2), Swiggy narrowed its consolidated net loss marginally to Rs 625.5 crore from Rs 657 crore a year ago. However, sequentially, the loss increased, as the firm had reported a consolidated loss of Rs 611 crore in the first quarter of FY25.
Swiggy’s revenue from operations soared 30 per cent to Rs 3,601 crore in Q2FY25, compared to Rs 2,763.3 crore a year ago. Its overall gross order value also grew by 30 per cent year-on-year (Y-o-Y), reaching Rs 11,306 crore during Q2FY25.
Its platform’s average monthly transacting users grew 19.2 per cent Y-o-Y to 17.1 million.