Swiggy Stock Target Price: Shares of Swiggy, a newly listed player in the food delivery space, have so far proved to be a profitable deal for those investors who had invested money in its IPO. This share is currently trading around Rs 518 compared to its IPO price of Rs 390. This means that those who invested money in IPO have received more than 30 percent returns so far. Till now experts were considering it as a solid bet. But after the quarterly results, brokerage houses are alert about its short term outlook. According to him, there may be some decline in the stock from the current price. He has also given important reasons behind this.
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HDFC Securities : REDUCE RATING
Brokerage house HDFC Securities has given REDUCE rating on Swiggy’s shares and has given a target price of Rs 470. This is Rs 48 less than the current price of Rs 518. The brokerage says that in Q2FY25, Swiggy has made a step up in customer acquisition in both food delivery as well as quick commerce. The company has registered a healthy growth of 4.8 percent and 18.3 percent on quarterly basis in MTU in food delivery and quick commerce, which has increased to 14.7 million and 6.2 million. Overall, B2C GoV has grown by 30 percent on a yearly basis and by 11 percent on a quarterly basis. In food delivery, GoV grew 5.6% YoY to Rs 71.9 billion, driven by 26bps driven by SwiggyOne Subscription’s aggressive efforts to recruit more users.
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Adjusted EBITDAM for food delivery increased by 76bps quarter-on-quarter to 1.6% due to better fixed cost absorption. In Quick Commerce, GoV grew by 24 percent on a quarterly basis. Despite meaningful expansion in CM due to front-loading of expansion-based expenses, adjusted EBITDA loss widened to Rs 3.6 billion on a quarterly basis. Order density for Swiggy’s dark store network is improving. However, on a similar scale, Blinkit had covered ground in terms of unit economics (-2.5% CM for Blinkit vs -10.6% for Instamart). Whereas the progress in customer acquisition is encouraging.
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Motilal Oswal: Neutral Rating
Brokerage house Motilal Oswal has given Neutral rating on Swiggy’s stock and has made the target price Rs 475, which is Rs 43 less than the current price of Rs 518. The brokerage says that Swiggy, through its innovation DNA, has played an important role in effectively inventing both food delivery and quick commerce. Also has played a leading role in these categories. However, its lead in food delivery has seen a decline and it is currently lagging behind its main rival in quick commerce, Blinkit, in terms of both GO growth and profitability. While the Q-commerce race is just beginning, Swiggy’s re-rating depends on accelerating GO growth, increasing AOV and improving execution in the Q-commerce business.
The brokerage expects food delivery orders to grow at 12.5% YoY with an AOV growth of 1.4%, which could lead to a GOV growth of 14.1% in FY24-37. Q-commerce is expected to grow rapidly with orders growing at 23.6% YoY, AOV growth at 3.2%, and GOV growth at 27.6%. Swiggy is expected to report PAT margin of -16.1%/-3.9%/1.8% in FY25/FY26/FY27.
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Swiggy Q2FY25: How were the quarterly results?
Swiggy had recently released quarterly results for the first time after its IPO. The company’s loss increased to Rs 625.53 crore in the September quarter of the current financial year, which is more than Rs 611 crore in the previous quarter. However, the loss has narrowed on a year-on-year basis, which stood at Rs 657 crore in Q2 FY24. On the other hand, the company’s revenue increased by 12% quarter-on-quarter (QoQ) and 30% year-on-year (YoY) and reached Rs 3601.45 crore.
The company also saw a 30% year-on-year growth in its gross order value (GOV), which reached Rs 11,306 crore. Also, the number of average monthly transacting users (MTU) has increased by 19.2% to 1.71 crore. Instamart and the new 10-minute delivery service Bolt have played an important role in the improvement in the company’s performance. Bolt has grown to account for 5% of total food deliveries in just eight weeks of launch. Instamart has also registered 24% QoQ growth in quick-commerce.
(Disclaimer: The view or advice on the share is given by the brokerage house. These are not the personal views of Financial Express. There are risks in the market, so take expert opinion before investing.)
