Swiggy made its debut at Rs. 412 with a modest listing gain of 5.64 percent from its IPO price of Rs. 390. Following its listing, it experienced a strong rally and went up to Rs. 617, up 49.75 percent from its listing price.
However, despite trading at elevated valuations, concerns over the company’s uncertain path to profitability weighed on investor sentiment. Since reaching its peak, the stock has continuously declined, reaching a low of 317, down 48.62 percent from its all-time high.
Reasons for fall
The company’s revenue has been growing steadily, but despite that, the path to profitability is not clear and the losses keep increasing primarily because of an increase in manpower and marketing spends.
Competition in quick commerce is very high, with highly competitive players like Zomato and Zepto, as well as cash-rich companies like Amazon, Flipkart, and Reliance. This increased competition has put a toll on Swiggy’s market share of Instamart.
Other than that, the Indian stock market is also falling and investors are looking for safe haven sectors and stocks, selling their risky investments. Because of sustained selling by Foreign Institutional Investors (FIIs), driven by a strengthening US dollar that makes emerging markets less attractive.
ICICI Securities report on Swiggy
The broker has given a buy report with a target price of Rs. 740, which is a substantial 131 percent Upside from the current level of Rs. 320. They have given the BUY rating on Swiggy with the use of a three-stage DCF-based target. Risks that are highlighted by brokers are, the slowdown in discretionary spending and negative externalities disrupting business operations.
For food delivery, their Gross Order Value (GOV) grew 3.4 Percent QoQ/19.2 percent YoY, their contribution margin ( as a percentage of GOV) was 7.4 percent ( up 80bps QoQ)
For Quick Commerce GOV grew 15.5 percent QoQ / 88.1 percent YoY, their contribution margin was -4.6 percent (down from -1.9 percent in Q2FY25). The contribution Margin was down because of, increased marketing expenses and manpower costs.
Also read: HDFC or ICICI: Which bank holds stronger long term potential according to Bernstein
Financial Highlights
The company reported a 30.96 percent YoY increase in revenue from Rs. 3,049 Crore in Q3FY24 to Rs. 3,993 Crore in Q3FY25. On a QoQ basis, the company reported an increase of 10.88 percent in revenue from Rs. 3,601 Crore in the previous quarter.
Their Net loss saw an increase YoY from Rs. 574 Crore to Rs. 799 Crore for the same period. On a QoQ basis also, the company reported an increase in Net loss from Rs. 626 Crore in the previous quarter.
About the Company
Swiggy, founded in 2014 and headquartered in Bangalore, is one of India’s leading food delivery and quick-commerce platforms. Initially launched as a food delivery service, it has expanded into multiple verticals, including Instamart for quick grocery delivery, Swiggy Genie for parcel delivery, and Swiggy Access for cloud kitchens.
Written By Abhishek Das
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https://economictimes.indiatimes.com/markets/stocks/recos/buy-swiggy-target-price-rs-740-icici-securities/articleshow/118001886.cms?from=mdr (broker report)
