Swiggy Ltd.'s Q1 earnings drew mixed reactions from brokerages, with most analysts choosing to look beyond wider-than-expected losses and instead focus on improving economics in its quick commerce business, Instamart. The food delivery and quick commerce platform reported a 37.3% year-on-year increase in revenue. However, its EBITDA loss widened to Rs 650 crore, higher than the Street's expectation of a Rs 504 crore loss, while the net loss stood at Rs 791 crore, also exceeding analyst estimates.
The key positive for investors was Instamart achieving contribution margin break-even, a milestone that management said validates its strategy of balancing growth with improving unit economics.
Swiggy reiterated its medium-term target of achieving adjusted EBITDA of 5% of GOV and said overall adjusted EBITDA break-even could be reached at an annualised Net order value run rate of around Rs 60,000 crore.
ALSO READ: Swiggy Q1 Results: Net Loss Narrows, Revenue Jumps 37%
Citi retained its 'Buy' rating but trimmed its target price to Rs 390 from Rs 415. Jefferies reiterated its 'Buy' rating with a Rs 415 target price, noting that while contribution margin break-even in quick commerce is encouraging,
Bernstein remained the most optimistic, maintaining an 'Outperform' rating and a Rs 430 target. It believes improving industry dynamics, including reports of Zepto postponing its IPO, could ease competitive intensity and support a re-rating for Swiggy.
Macquarie, however, retained its 'Underperform' rating with a Rs 230 target price, citing slower growth, elevated cash burn and uncertainty over the timeline for EBITDA break-even.
Brokerages on Swiggy
Citi
- Maintain Buy; Cut target price to Rs 390 from Rs 415.
- Q1 missed estimates, though quick commerce growth accelerated and contribution margin break-even came sooner than expected.
- Swiggy is shifting its strategy to maximise growth while maintaining contribution margin break-even, rather than prioritising break-even above all else.
- Food delivery growth was slightly soft, though margins remained healthy.
Jefferies
- Maintain Buy; Target Price: Rs 415.
- Instamart has achieved contribution margin break-even, though EBITDA break-even remains some distance away.
- While management has outlined a clear path to EBITDA profitability, execution will need to be closely monitored.
- Food delivery growth was broadly in line, even as losses in Going Out remained elevated.
- Management remains confident about the product-market fit of its Going Out business.
- Expects to revise estimates, including higher loss forecasts, after the analyst meet on August 6.
Bernstein
- Maintain Outperform; Target Price: Rs 430.
- Believes the quick commerce business is well positioned for a re-rating.
- Sees the competitive environment turning increasingly favourable for Swiggy.
- Q1 performance was strong and expects the next few quarters to be even better.
- The postponement of Zepto's IPO could improve the competitive landscape.
Macquarie
- Maintain Underperform; Target Price: Rs 230.
- Growth has slowed while cash burn remains elevated.
- Swiggy has outlined a path to adjusted EBITDA break-even for Instamart, but the timeline and trajectory remain unclear.
- Given the recent appointment of a new Instamart CEO and broader management changes, Macquarie views these targets as aspirational rather than its base case.
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