Swiggy Q1 Review: Brokerages Hike Share Price Targets Amid Quick Commerce Boom

Swiggy Ltd. shares have received target price hikes from two notable brokerages after first-quarter revenue growth beat estimates and the food delivery segment rose faster than rival Zomato Ltd.

Of the eight analysts tracking Swiggy and issuing ratings after results, six have recommended a 'buy' and two suggest 'sell', as per Bloomberg data. ICICI Securities has the highest price target of Rs 740 on the stock, followed by Rs 540 from Incred Research.

Jefferies upgraded the stock to 'Buy' from 'Hold' and hiked its 12-month target price to Rs 500 from Rs 380 earlier.

Morgan Stanley maintained 'Overweight' and raised the target to Rs 450 from Rs 445.

Analysts cited strong growth in food delivery while momentum continued in quick commerce.

Consolidated, QoQ

• Revenue up 12.5% at Rs 4,961 crore versus Rs 4,410 crore (Estimate: Rs 4,878 crore).

• Net loss at Rs 1,197 crore versus Rs 1,081 crore (Estimate: Loss of Rs 932 crore).

• Ebitda loss narrows to Rs 954 crore versus Rs 962 crore (Estimate: Ebitda loss of Rs 804 crore).

The food delivery business reported 18% year-on-year growth and a 10% sequential rise, supported by improved demand and higher order frequency.

However, the standout performer remains its quick commerce arm, which registered a staggering 114% annualised growth and a 17% sequential increase, indicating strong traction in its express grocery and essentials delivery model.

Swiggy guided high single-digit growth for the full financial year, with most business segments expected to deliver strong performances. Excluding beverages, which are forecasted to grow in the single digits, all other verticals are expected to achieve double-digit growth.

Here's what analysts said after Swiggy announced its Q1 results.

Macquarie

• Maintain 'Underperform' with a target price of Rs 260.

• We believe Swiggy's Q1 loss-making results further underscored the economic challenges for the quick commerce platform sector.

• We continue to highlight material downside risks to consensus estimates.

• In Instamart, we see risks to the company's contribution margin breakeven timeline.

• We do not expect a linear improvement in dark store utilization.

• Even when contribution margin hits breakeven, Instamart will still likely see at least a 5% adjusted Ebitda margin loss.

• We remain fundamentally guarded, as we do not foresee positive Instamart economics within our forecast horizon.

Jefferies

• Q1 saw strong growth in food delivery, and momentum continued in quick commerce.

• Ebitda margins in both segments declined, which management attributed to factors such as higher payouts to riders and revisions in staff compensation.

• With a short-term pause on dark store expansion and easing competition, Q1 profitability marked the trough.

• Swiggy, however, remains susceptible to high volatility due to a low margin base.

Morgan Stanley

• Growth in food delivery is living up to expectations.

• We now anticipate a slower pace of margin improvement.

• Q1 demonstrated good unit economics, accompanied by strong commentary regarding Q2.

• Consequently, we are now moving up our profitability assumption in the Quick Commerce business.

Swiggy shares settled 0.66% higher at Rs 403.75 apiece on the NSE, ahead of the results, compared to a 0.35% decline in the benchmark Nifty 50. Swiggy's shares have fallen 25.36% year-to-date and 11.46% since its listing in November.