The food delivery and quick commerce industry has faced multiple headwinds over the past few months. Food delivery growth slowed due to weak consumption and macro pressures, while quick commerce profitability came under strain from heightened competition, accelerated dark store rollouts, and elevated customer acquisition costs. Motilal Oswal now believes the cycle is turning.
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Motilal Oswal Report
We raise our food delivery growth estimates for both Zomato and Swiggy to 21-23% for FY26-27 (vs. 19-20% earlier). To capture this stronger growth outlook, we now value FD businesses at 35x FY27E adjusted Ebitda, compared to 27x earlier, reflecting not only faster top-line recovery but also improved visibility on profitability.
On the quick commerce side, we bring forward our profitability assumptions for Instamart and Blinkit, as easing competitive intensity, moderating dark store expansion, and declining customer acquisition costs have accelerated the path to breakeven. We expect contribution margins to recover meaningfully over the next few quarters.
The revisions lead to upgraded target prices for both Swiggy and Eternal.
We upgrade Swiggy to Buy with a target price of Rs 560 (implying 32% upside), reflecting the inflection in FD growth and improved unit economics in QC.
We retain our Buy rating on Eternal with a target price of Rs 420 (implying 29% upside), as we continue to see structural tailwinds and upside to earnings estimates for the company.
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