Swiggy Shares Downgraded To 'Add' By HDFC Securities Post Q1 Results —Check Target Price

While food delivery remains stable; execution gap in quick commerce continues to widen vs Blinkit. Swiggy’s cash balance remains uncomfortably low relative to the expected burn for the next four quarters.

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Our previous upgrade note on Swiggy Ltd. (May-25) was primarily a bet on capturing some quick commerce value (available for free then). Since then (up 33%), most of the low-hanging fruits (in terms of returns) seem captured and hereon its essentially a race against time. Can Swiggy’s cash balance last the current burn rate (Cash: Rs 53.5 billion, we estimate ~Rs 30-32 billion burn over next four quarters).

Sure, the Rapido stake (~12%) monetization could help; but its cutting it too close for us to be comfortable taking this bet. Hence, we downgrade Swiggy to Add rating (earlier: Buy) with an SOTP-based target price of Rs 400/share (unchanged); implying 4x Jun-27 EV/sales (includes 43x Jun-27 EV/Ebitda for food delivery; 1x Jun-27 NOV).

On the Q1 print, overall B2C gross order value grew 45.2% YoY (14.8% QoQ) to reach Rs 147.9 billion (in-line). Food delivery GOV grew 18.8% YoY to Rs 80.9 billion (our estimate: Rs 80.5 billion), driven by monthly transacting user addition. FD’s adjusted Ebitdam declined QoQ by 51 bps to 2.4%, due to seasonal factors such as elevated delivery partner incentives and annual appraisals in Q1.

Instamart’s performance continues to lag that of Blinkit. Quick commercial NOV grew 18.2% QoQ vs Blinkit’s 25%. QC adjusted Ebitda losses widened QoQ to Rs 8.96 billion (Rs 8.4 billion in Q4; our estimate: Rs 8.89 billion). Q1 net losses stood at Rs 11.97 billion (our estimate: Rs 9.5 billion).

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