Kotak Institutional Equities has a price target of ₹360 on Swiggy, which is below its issue price of ₹390, but still implies an upside potential of 30% from Thursday’s closing levels.
The brokerage in its note said Instamart’s growth and profitability and consequently its valuations have been muted in the wake of competition and company-specific issues (assortment, store economics, etc).
Swiggy has provided aggressive long-term growth targets of ₹1.1 lakh crore to ₹1.4 lakh crore of gross order value (GOV) and ₹4,000 crore of earnings before interest, taxes, depreciation and amortization (EBITDA) by the financial year 2031, at its analyst meet earlier.
However, in the near-term, Kotak believes that Swiggy will have to focus on growth as well as curbing losses. This implies that through FY27, the following things should be witnessed:
- Recovery of GOV growth to 14% – 15% sequentially, compared to 3.1% in the June quarter.
- Material Contribution Margin expansion by the fourth quarter of the ongoing fiscal from current levels.
Slippage one either of these parameters may keep market sentiment weak on Instamart, Kotak warned in its note.
Swiggy’s net loss in the first quarter narrowed to ₹791 crore from a loss of ₹1,197 crore in the previous year. Its revenue from operations was up 37.3% to ₹6,812 crore from ₹4,961 crore last year. Its EBITDA loss narrowed to ₹650 crore from ₹945 crore in the previous year.
Swiggy’s food delivery business reported a 17.4% increase in GOV to ₹9,460 crore, which was below Street estimates of 18.19% growth.
Of the 30 analysts who have coverage on Swiggy, 21 have a “buy” rating, six have a “hold” rating and three have a “sell” rating.
Shares of Swiggy are off opening highs, currently trading 0.7% higher at ₹277.85. The stock is still down around 30% so far this year.
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