Swiggy Shares Target Rs 640: 5 Reasons Analysts Recommend a ‘Buy’, Zomato Comparison, and More

Swiggy Ltd shares gained 3% on Monday after a Business Today report hinted at a possible GST clarification on input tax credit for Electronic Commerce Operators (ECOs) like Swiggy and Zomato. The stock hit a high of Rs 547.35, while Zomato rose 0.76% to Rs 290.60.

Why Analysts Recommend a ‘Buy’ on Swiggy Shares:

1. Strong Investment Case
   Swiggy, India’s second-largest player in food delivery and quick commerce (q-com), is seen as an attractive opportunity for exposure to the growing e-commerce sector. Axis Securities initiated coverage with a ‘Buy’ rating, setting a target price of Rs 640, which represents a 27% valuation discount to peer Zomato.
2. Growth Potential in Food Delivery and Q-Com
   Swiggy’s core segments—food delivery and quick commerce—are relatively underpenetrated and offer significant growth potential. Swiggy Instamart is focusing on footprint expansion to accelerate gross order value (GOV) and revenue.
3. Profitability and Cost Optimization
   Swiggy has made notable improvements in cost management and is narrowing the profitability gap with Zomato. Measures include optimizing delivery costs, renegotiating commissions, and restructuring its leadership to a professionally managed model.
4. Innovation and Leadership
   Swiggy has been an industry innovator in food delivery and quick commerce. While it ceded leadership to Zomato, its organizational restructuring and strengthened management are expected to bolster competitiveness.
5. Positive Industry Outlook
   Food delivery, dominated by Swiggy and Zomato in a duopoly, is projected to experience healthy growth and profitability due to economies of scale and operational efficiencies.

Comparing Swiggy and Zomato

• Operational Metrics: Zomato leads in MTUs (Monthly Transacting Users), order volumes, and restaurant/store partnerships. It also benefits from premiumization, resulting in higher average order value (AOV).
• Market Penetration: Zomato’s Blinkit has a faster-growing q-com segment compared to Swiggy Instamart, driven by wider reach and more extensive dark store expansion.
• Profitability: Swiggy’s profitability is improving, but Zomato’s cost control and faster growth give it an edge.

Despite these differences, analysts believe Swiggy can bridge the profitability gap with strategic initiatives and operational efficiencies.

Analyst Outlook

Axis Securities’ target price of Rs 640 reflects optimism about Swiggy’s growth trajectory and potential for improved margins. Key areas of focus include dark store expansion for Instamart, better cost structures, and enhanced cross-selling opportunities.

Disclaimer: This article is for informational purposes only. Readers should consult financial advisors before making investment decisions.