Motilal Oswal Financial Services recently shared their thoughts on Swiggy, giving it a “neutral” rating with a target price of Rs 475. Currently, Swiggy’s stock price stands at Rs 522.7.
In the second quarter of FY25, Swiggy made Rs 36.1 billion, which is an 11.7% increase compared to the previous quarter and a whopping 30.4% compared to last year. In the food delivery section, Swiggy reported Rs 71.9 billion in goods ordered (GOV), marking an increase of 5.6% from the last quarter and 14.6% from a year ago. They expect food delivery to grow in the high teens for FY25.
Swiggy’s grocery delivery service, Instamart, performed really well, racking up Rs 33.8 billion in GOV, which is a 75.5% increase from last year. To keep up with demand, Swiggy plans to double its dark stores (places where food is prepared and stored) by FY25 from 523 stores in FY24.
In terms of earnings, Swiggy’s food delivery service had an adjusted EBITDA margin of 1.6%, which is an improvement, as well as a slightly better contribution margin of 6.6%. However, the overall adjusted EBITDA was a loss of Rs 3.41 billion. Instamart’s contribution margin is still negative at -1.9%, but it is improving.
Swiggy reported a net loss of Rs 6.2 billion but noted a 4.7% decrease in losses compared to a year before. They believe they can reach breakeven in overall adjusted EBITDA by the third quarter of FY26.
Swiggy has been a key player in food delivery and grocery delivery, but it’s losing ground to its main competitor, Blinkit. To grow, Swiggy needs to boost its sales and improve its business operations.
According to Motilal Oswal, they expect food delivery orders to grow by 12.5% a year, along with a small growth in average order value (AOV). Quick commerce (Q-commerce) is expected to grow even faster at 23.6% a year.
Swiggy is projected to have a profit margin of -16.1% in FY25, improving to -3.9% in FY26, and then turning positive at 1.8% in FY27.
Despite some changes, Swiggy still faces challenges ahead. They maintain their DCF-based valuation at Rs 475, suggesting a 5% drop from the current price. Overall, the brokerage keeps a neutral rating on the stock.
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