Zomato Pips Swiggy To Bag Up To 28% Upside From Analysts

Brokerages are bullish on Zomato Ltd. as it is outperforming Swiggy with higher revenue growth and profitability.

Being ahead of its peers on profitability, Zomato will continue to provide opportunities to further gain market share and improve profitability, Goldman Sachs said in a note.

The comments come after Prosus, which holds a 32.7% stake in Swiggy, has disclosed key data points on Swiggy's operating performance, highlighting improvements but it is still lagging behind Zomato.

Here's What Brokerages Say

CLSA

• Maintains a ‘buy' rating on the stock and a target price of Rs 248 apiece, implying a potential upside of 28% from the previous close.

• Zomato reported positive earnings before interest, taxes, depreciation, and amortisation of $5 million, while Swiggy's trading losses reduced to $158 million.

• Zomato's overall gross order value growth is 36% as compared to Swiggy, which is at 26%.

• Zomato's revenue grew at 56% versus Swiggy, which is at 24%.

• Zomato is growing faster than Swiggy.

• Zomato's Blinkit has 526 dark stores as compared to Swiggy Instamart's 487 dark stores.

Emkay

• Maintains a ‘buy' rating on the stock and a target price of Rs 230 apiece, implying a potential upside of 16% from the previous close.

• Zomato's higher growth has been aided by the superior performance of its quick commerce section Blinkit.

• Swiggy's overall losses narrowed to $261 million from $531 million in 2022.

• Swiggy's IPO is now a key milestone, with valuation being the main monitorable.

• Steady improvement in operational performance and the planned IPO of Swiggy are likely to keep investor interest high in the space.

Goldman Sachs

• Maintains a 'buy' rating on the stock and a target price of Rs 240 apiece, implying a potential upside of 21% from the previous close.

• Prosus' Swiggy disclosure suggests further share gains for Zomato.

• The GOV scale of Zomato is more than 30% larger than that of Swiggy.

• Zomato's market share is now at 56–57%, with a 200 bps expansion as compared to the previous period.

• Quick commerce Zomato scale is likely 50% larger than its nearest competitor.

• Zomato being ahead of its peers on profitability will continue to provide opportunities to further gain market share and improve profitability.

• Online grocery delivery expects competition to be consistent. 

Kotak

• Maintains a 'buy' rating on Zomato and a target price of Rs 225 apiece, implying a potential upside of 13.6% from the previous close.

• Zomato's overall gross-merchandise-value growth came in at 32% year-on-year, compared with Swiggy's 26% year-on-year growth.

• Prosus, which holds a 32.7% stake in Swiggy, disclosed Swiggy's overall GMV growth in its annual results.

• Swiggy's revenue closely trails gross merchandise value growth; losses came further in calendar year 2023.

• Higher growth from Instamart could have diluted the overall take rate.

• Swiggy's adjusted Ebitda loss came in at $261 million in 2023, substantially lower than $531 million reported in 2022. By comparison, Zomato reported adjusted Ebitda profit of $20 million in 2023.

• Swiggy's food-delivery profitability improvement was aided by added revenue streams, such as restaurant advertising and platform fees.

• Swiggy's quick commerce gross merchandise value growth was much ahead of peers.

• Blinkit had 487 dark stores as of March 2024, whereas Zepto currently has 350 stores. This makes Swiggy number two among quick commerce players from the perspective of dark store count.