Synopsis:
Leading brokerage house, DAM Capital, expects an upside of 26 percent and 24 percent, respectively, in Swiggy and Zomato citing its matured phase, margin expansion, low capex, and an improved working capital efficiency.
Shares of these leading e-commerce food aggregators are in focus as DAM Capital expects Blinkit to achieve EBITDA profitability by the end of FY26 and Swiggy Instamart by the end of FY28. It also laid out many more insights, which we will discuss in this article.
Analyst Comment
DAM Capital assigned a Buy call on Swiggy with a target price of Rs 515 per share, signalling an upside potential of 26 percent from its previous day’s closing price of Rs 409.60 per share.
On the other hand, DAM Capital assigned a Buy call on Eternal with a target price of Rs 400 per share, signalling an upside potential of 24.5 percent from its previous day’s closing price of Rs 321.40 per share.
According to the brokerage, both companies’ food businesses have reached a level of maturity that’s likely to boost their profit margins and lead to significant growth in free cash flow over the next three years.
This positive trend will be backed by reduced capital expenditures and better efficiency in working capital. The free cash flow generated will support their quick-commerce ventures, with Blinkit anticipated to hit EBITDA profitability by the fourth quarter of FY26, while Swiggy’s Instamart is expected to follow suit by the fourth quarter of FY28.
DAM Capital forecasts a revenue increase of 42 percent for Eternal and 28 percent for Swiggy from FY25 to FY28. Eternal is already profitable in terms of profitability, while Swiggy is projected to reach PAT profitability by FY28.
Furthermore, the Gross Order Value (GOV) for both companies is expected to rise by 18-20 percent, with improving EBITDA margins likely to drive a compound annual growth rate (CAGR) of 30 percent for Eternal and 60 percent for Swiggy over the next three years.
In conclusion, both Swiggy and Zomato (Eternal) present strong growth opportunities as per DAM Capital’s outlook. With improving profit margins, rising free cash flows, and significant quick-commerce potential, the brokerage sees an upside of up to 26% in these stocks over the next few years, making them an attractive buy for investors.
Written by Satyajeet Mukherjee
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