Swiggy shares rally 4% as UBS initiates coverage with Rs 515 target price
Swiggy climbed as much as 4% on Monday to Rs 448.65 on BSE after brokerage UBS initiated coverage on the leading food delivery player with a ‘buy’ rating and a target price of Rs 515, citing potential for growth amid India’s expanding online food delivery and quick commerce markets.
UBS noted that Swiggy, which recently made its Dalal Street debut on November 13, is well-positioned to benefit from its improving margins and scale. Swiggy’s quick commerce business is slated for promising growth potential, catering to rising consumer demands for rapid delivery.
The brokerage highlighted that Swiggy’s valuation is currently at a 35% discount compared to its rival Zomato. UBS expects this gap to narrow as the food delivery player exhibits sustained growth. Swiggy is projected to achieve a gross merchandise value (GMV) CAGR of 35% and revenue CAGR of 29% between fiscal 2024 and 2027.
Swiggy’s food delivery segment, which accounts for 67% of its GMV, has achieved stable unit economics. The company recently broke even in adjusted EBITDA terms, posting a 0.9% margin in Q1 FY25.
UBS views Swiggy’s evolving business model, focused on online food delivery (OFD) and quick commerce (Q-com) as a strategic advantage, setting the firm for long-term growth in an expanding, but competitive Indian market. The brokerage, however, cautioned about operational inefficiencies, emphasizing the need for further improvement to fully harness its potential.
Stock Trading
Algo Trading Made Easy
By — Vivek Gadodia, Partner at Dravyaniti
