Swiggy Gets 'Buy' Rating As ICICI Securities Initiates Coverage

ICICI Securities initiated coverage on Swiggy Ltd. with a 'buy' rating as it initiated a target price of Rs 740, assuming WACC or terminal growth of 11.5% or 5%. The brokerage sees a 46% upside in Swiggy at current valuation.

"We see the Swiggy’s stock trading at Rs 850 in our bull-case scenario and Rs 415 in our bear-case, implying a risk-reward skew of 3.8:1 to the upside," ICICI Securities said.

"Our survey data shows a growing preference (mind share) for Swiggy among restaurant partners. Also, Swiggy has showcased great execution on ‘Swiggy BOLT,’ their 10-min food delivery offering and ‘Swiggy BLCK,’ their premium loyalty offering. Management notes Bolt now forming ~9% of Swiggy’s food delivery gross order value," it added.

The brokerage highlighted that their survey data shows that preference for Swiggy among restaurant partners is slowly improving. "Also, Swiggy has showcased great execution on Swiggy BOLT and Swiggy BLCK. We think that, in the near term, Swiggy could gain share over Zomato in food delivery," the brokerage further said.

According to management, Bolt recently became ~9% of Swiggy food delivery gross order value. "We think only 200-300 bps of this is fresh demand, while the rest is replacement demand of the traditional food delivery platform. In our view, this additional demand from Swiggy Bolt could aid in market share gains for Swiggy in the near term," ICICI Securities said.

Risk-reward skew for Swiggy is more favourable as well, it said.

According to the brokerage, new entrants are unlikely to disrupt quick commerce meaningfully. "We believe the swift ramp-up of their dark store footprint is helping incumbents create a barrier to entry into the segment," it noted.

Shares of Swiggy were trading 3.04% lower at Rs 492.95 apiece, compared to a 0.5% decline in the benchmark NSE Nifty 50 as of 2:40 p.m.

The stock has risen 8.10% since its listing on Nov. 13, 2024. Total traded volume so far in the day stood at 4.22 times its 30-day average. The relative strength index was at 42.60.

Eight out of the 13 analysts tracking the company have a 'buy' rating on the stock, two recommend a 'hold,' and three suggest a 'sell,' according to Bloomberg data. The average of 12-month analyst price targets implies a potential upside of 20.2%.