Swiggy shares climb over 5% after CLSA initiates coverage with buy rating, sees TP at Rs 708

Shares of food and grocery delivery firm Swiggy jumped as much as 5.6% to Rs 567.90 on Tuesday after global brokerage firm CLSA initiated coverage on the stock with a target price of Rs 708.

While assigning an outperform rating to Swiggy, CLSA noted that the company has significant growth potential as it addresses a very large TAM for food delivery and quick commerce.

The brokerage said it expects Swiggy's execution to improve with accelerating growth and rising profitability, and anticipates that Indian quick commerce will grow 6x from FY24 to FY27.

"Swiggy is likely to continue lagging behind Zomato, but we believe this gap is reflected in the price," it said, adding that Swiggy’s execution will improve with accelerating growth and rising profitability.

In the September quarter, the company reported that its revenue from operations grew 30% year-on-year (YoY) to Rs 3,601.5 crore, up from Rs 2,763.3 crore in Q2 FY24. Quarter-on-quarter (QoQ), revenue rose 11.77%.

Swiggy’s gross order value (GOV) surged 30% YoY to Rs 11,306 crore, and platform monthly transacting users increased 19.2% YoY to 17.1 million, indicating steady user growth.

Motilal Oswal expects Swiggy’s food delivery orders to grow at 12.5% annually with an AOV growth of 1.4%, leading to a GOV growth of 14.1% over FY24-37, while the Q-commerce is expected to grow faster with orders increasing at 23.6% annually, AOV growth at 3.2%, and GOV growth at 27.6%.

“What was interesting, however, was Swiggy’s guidance for growing faster than the “category average” (aka Zomato) over the medium term in food delivery,” Motilal Oswal noted. Despite the optimistic results, the brokerage maintained a “neutral” rating on Swiggy, citing competitive risks from players like Zomato and Blinkit. The firm valued Swiggy at Rs 475 per share.

Swiggy’s plans for expansion include doubling its Instamart dark store count by March 2025 and investing Rs 1,600 crore in its subsidiary Scootsy Logistics for further growth. The company also announced the formation of a wholly owned subsidiary for sports-related ventures.

Shares of the company pared its gains earlier in the day and ended at Rs 542 at close of trade, up 0.96%.