Swiggy Q4 Results Review: HDFC Securities Upgrades The Stock To 'Buy', But Cuts Target Price — Here's Why

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HDFC Securities Institutional Equities

Swiggy Ltd.’s food delivery print was largely in line (monthly transacting users at 15.1 million vs our estimate’s 15.2 million, gross revenue up 19.7% at Rs 18.67 billion vs our estimate’s Rs 18.5 billion, adjusted Ebitda at Rs 2.12 billion vs our estimate’s Rs 2.14 billion). However, contextually, quick commerce performance outpaced expectations as despite higher-than-expected customer acquisition (MTU addition at 2.8 million vs our estimate's 1.1 million), QC burn was largely in line at -Rs 8.4 billion (our estimate: -Rs 8.6 billion; Q3 FY24 adjusted Ebitda was at -Rs 5.8 billion).

The sequential jump in QC burn was attributed to sustained high customer incentives, acquisition costs, aggressive dark store expansion (added 316 stores in Q4) and consequent under-utilized capacity.

Management expects a gradual unwinding of these losses as peak investments in QC seem behind them. Post ~50% stock price correction over the past five months, value is emerging as at CMP, we are paying ~Rs 75 billion (<$1 billion) for the Instamart business.

Note: Our FY27 Pre-IND AS Ebitda loss estimates largely remain unchanged (at - Rs 18 billion). We upgrade Swiggy to a Buy with an SOTP-based target price of Rs 400/share (implying 3.5x FY27 EV/sales).

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