Swiggy shares rebound 22% in a month; brokerages see further upside potential

Shares of Swiggy Ltd rose 0.49 per cent on Tuesday to close at Rs 390.95, marking a 21.79 per cent gain over the past month. Despite the recent rebound, the stock remains down 27.89 per cent on a year-to-date (YTD) basis. The upward momentum comes amid positive coverage from brokerages including IIFL Capital and BNP Paribas, both of which anticipate further gains.

IIFL Capital has initiated coverage with a 'BUY' rating and a 12-month DCF-based target price of Rs 535, indicating a potential upside of 36.85 per cent. The brokerage expects Swiggy to achieve EBITDA and PAT profitability by FY27 and FY28, respectively, supported by a projected 28 per cent revenue CAGR over FY25–28.

According to IIFL, Swiggy's food delivery (FD) business is valued at $8.5 billion, in contrast to Zomato's $14.4 billion. While Swiggy trails its key competitor Eternal (formerly Zomato Ltd) in both FD and quick commerce (QC), the brokerage attributes this gap to execution issues rather than structural disadvantages.

BNP Paribas has also initiated coverage with an ‘OUTPERFORM’ rating and a target price of Rs 455. "Swiggy has been a pioneer in food delivery and quick commerce, building its business organically. While it has lost some ground to Eternal due to better execution and timely acquisitions, its strategic positioning remains strong," BNP said.

Both brokerages emphasise the significance of Swiggy's QC segment, valued at $1.8 billion. BNP Paribas notes that the FD business is already EBITDA-positive with minimal capex, while QC's cash burn is expected to decline, potentially turning contribution positive in the coming quarters.

IIFL adds that successful execution in the QC business could deliver an "asymmetric upside" for the stock.

Overall, they believe Swiggy's prospects are promising, provided it strengthens operational execution and remains focused on strategic growth. The expected turnaround to profitability and the evolving competitive landscape in food tech further underline its long-term potential.