UBS, a global brokerage firm, has started covering Swiggy, a major food delivery platform company, and given it a ‘Buy’ rating. They have set a target price of INR 515 for the next 12 months.
UBS set target price of INR 515, 19% uptick
This represents an over 19% upside from the stock’s last closing price of INR 431.25. UBS believes that there is “plenty of room at the table” and Swiggy is well-positioned to benefit from the rapid growth in India’s food delivery and quick commerce markets.
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Meanwhile, the brokerage firm noted that while Swiggy lost market capitalization in the previous year, data shows signs of market share stabilization. This is visible in the company’s Q1 FY25 results as well. On the quick commerce vertical, UBS said that Swiggy lost market share to peers despite being the pioneer in the segment.
Swiggy Instamart’s order count sees 41% jump
However, the company has made infrastructure changes to adapt to changing trends, including expanding the size of dark stores and densifying the dark store footprint in urban areas. These changes have shown results, with Swiggy Instamart’s order count jumping 41% in Q1 FY25 and average order value increasing by 10%. Despite this, Instamart needs to narrow the gap with Blinkit.
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Further, UBS expects Swiggy’s quick commerce vertical to achieve adjusted EBITDA breakeven in FY29. The brokerage firm believes that Swiggy’s stock price is at a 35-40% discount to Zomato and sees room for this valuation discount to narrow as the company demonstrates stabilizing market share.
Notably, UBS has become the latest brokerage firm to initiate coverage on Swiggy after its listing earlier this month. Other brokerage firms, including JM Financial and Motilal Oswal, have also initiated coverage on Swiggy with ‘Buy’ and ‘Neutral’ ratings, respectively.
