Buy Eternal, Swiggy shares as competitive intensity cools, says Elara

Elara Securities on Monday said it retained 'Buy' on Eternal Ltd (erstwhile Zomato) and Swiggy Ltd, with preference for Eternal given the leadership in quick commerce (QC). The domestic brokerage said peak discounting is largely behind domestic QC players, as Swiggy refocuses on profitability and IPO-bound Zepto rationalises its promotional intensity. Blinkit, already Ebitda profitable, has largely avoided the price war, it noted.

"Cooling competitive intensity would serve as a tailwind for Blinkit and aid DMart’s margins but given the shift of top-ups to convenient quick commerce, like-for-like (LFL) growth may be in 5-6 per cent band in the near term with store expansion as a key monitorable to drive any upgrades for DMart," Elara said.

Elara said as per its pricing checks regarding quick commerce and modern trade for select assortments such as grocery, FMCG and BPC, which account for over 60 per cent of gross order value (GOV) for quick commerce), DMart Offline offers 8 per cent discount to Blinkit and 14 per cent discount on maximum retail price.

Zepto and Instamart prices are said to be 3-4 per cent cheaper than Blinkit (10 per cent discount on MRP), placing all three in pricing proximity.

The brokerage suggested a target price for Rs 415 for Eternal and Rs 425 for Swiggy. It does not rate Avenue Supermarts (DMart) but said profitability focus by quick commerce could cushion the company. 

Elara said Instamart's measured store expansion (contribution margin guidance retained by Q1FY27) emphasises on aggressive pivot. The IPO-bound Zepto may rationalise its discounting strategy in the near term to demonstrate a path to profitability, which augurs well for DMart’s profitability and Blinkit (turn-around achieved). 

For DMart, despite lower prices, convenience proposition shall continue to drive QC growth as top-up purchases continue to shift from modern trade.