Swiggy Share Price: The food delivery company made a premium debut on the Indian stock market on Wednesday, November 13, 2024. The stock price listed at a 5.64% premium on BSE, and soon after gained momentum. Following its debut, Swiggy has also received its first brokerage coverage with a BUY rating. Broker JM Financial likes Swiggy stock and has set a Rs 470 target.
Why does JM Financial recommend BUY on Swiggy?
Food Delivery:
According to JM's note, while India's online food delivery market is likely to grow at a healthy CAGR of ~20% in the foreseeable future, the odds of disruption by new competition appear minuscule today. It's because QC is a much more lucrative opportunity than food delivery.
Even the food techs are likely to prioritise their QC ventures, as meaningful differentiation is unlikely in food delivery. This should ensure steady GOV growth (CAGR of 18-22%) and movement towards sustainable profitability (4-5% of GOV) for both incumbents, it said.
Therefore, JM's note added, "Meaningful share shifts are also unlikely, even if we factor in Swiggy growing a tad below the market on account of a few historical imbalances such as lower membership subscriptions, lesser presence in lower tier cities and inferior depth of supply."
Instamart:
JM sees immense growth potential in Instamart given QC is essentially a play on the broader retail market, which was sized at ~USD 1trln in CY22. While Swiggy tested the dark store-led business model first, a sudden rise in competition and better execution by competition did lead to market share erosion.
Despite that, in GOV terms, JM estimates Instamart was only behind Blinkit as of FY24, with a market share of ~28%. Moreover, the QC channel penetration within the broader retail market even today is barely ~0.35%, compared to ~5-6% e-retail penetration.
Even assuming the QC channel penetration will reach only 1.5-2% over the next 5 years, the market can expand at >50% CAGR. This will ensure exponential GOV/Revenue growth for Instamart over the medium term. Moreover, the QC business model has enough operating leverage to turn self-sustainable, when operating at scale, it added.
BUY Rating:
On the valuation, JM's note said, "We use the multiples-based SOTP method to value Swiggy in which each of its reported segments is valued basis either EBITDA, GOV or Sales multiples. These multiples are 10-50% lower than those used to value Zomato's segments due to differences in scale and profitability. Despite this discount, our Mar'26 TP for Swiggy works out to INR 470, indicating ~21% upside. We recommend 'BUY'."
Swiggy Share Price:
Swiggy opened at Rs 412 apiece, which was at a premium of 5.64% from its IPO price of Rs 390 apiece on BSE. The stock soon gained momentum to hit a new 52-week high of Rs 447. While its 52-week low is slightly near its IPO price of Rs 390.70 apiece.
At the time of writing, Swiggy price is trading at Rs 438 apiece, up by 6.31% from the listing price. But Swiggy is trading high by 12.31% from its IPO price.
Swiggy is listed and admitted to dealings on the Exchange in the list of ''B'' Group Securities on BSE.
Overall, it is believed that Swiggy has played a pivotal role in the rapid expansion of India's hyper-local on-demand market.
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