UBS Projects Nearly 40% Upside Potential For Swiggy Despite Q2 Loss Widening — Here's Why

UBS Global Research believes that Swiggy Ltd. share price may increase 39% in the next 12 months despite the company's loss widened in the second quarter. Trends in both in its quick commerce and food delivery businesses appear solid and the recently announced fundraise will likely alleviate the balance sheet concerns, according to the brokerage.

UBS Global Research has maintained a 'Buy' rating on the strock with a target price of Rs 580 apiece. The target price implies an upside potential of 39% from Thursday's close price.

Gross Order Value of Swiggy's food delivery business rose 18.8% on the year in line with UBS Global Research's estimates. The order value growth is above Zomato's 18% growth for the period, the brokerage said.

Food delivery businesses' Ebitda margin jumped 40 basis points on the quarter. However, the growth is because of a low-margin quarter because of seasonal factors, UBS Global Research said.

• Net Loss at Rs 1,092 crore versus loss of Rs 626 crore.

• Revenue up 54.4% At Rs 5,561 crore versus Rs 3,601 crore.

• Ebitda Loss at Rs 798 crore versus loss Of Rs 554 crore.

Gross Order Value in Swiggy's quick commerce segment jumped 24.2% on the quarter during July–September. Net order value grew 17.5% on quarter and 71% year on year. Orders grew rose 9.6% on the quarter compared to 4% growth recorded in the preceeding quarter.

Swiggy's Instamart is focused on onboarding high-quality customers, which is evident from the cohort analysis. The company added 40 dark stores during the quarter, expanding the total area to 4.6 million

Swiggy's board will consider raising as much as Rs 10,000 crore funds through a qualified institutional placement. UBS Global Research sees it as a positive catalyst because it addressed the balance sheet concerns compared to its peer Eternal Ltd.