“With a pause on dark store expansion and easing competition, Q1 profitability likely marked the trough. Swiggy, however, remains prone to high volatility due to a low-margin base,” Jefferies said while upgrading the stock to ‘Buy’ with a high risk-reward profile.
During the morning session, Swiggy shares fell 4% to Rs 386.25 on the BSE as investors tempered expectations. The food delivery business’s contribution margin contracted 50 bps QoQ to 7.3%, which the management attributed to seasonal rider availability issues and one-off fixed cost increases tied to appraisals.
Jefferies said it expects a 20% CAGR in food delivery revenue over FY25–28 in its base case. “Unit economics should steadily improve with scale as it unlocks cost efficiencies and as customer willingness to pay for convenience increases. We value Swiggy’s food delivery business at 38x Sep-27E adjusted EBITDA, quick commerce at 4x Sep-27E sales, SC&D at 0.5x Sep-27E sales, and OOH at 1x Sep-27E GOV to arrive at a price target of Rs 500,” it said.
Domestic brokerage firm Motilal Oswal expects margins to rebound from Q2 onwards as operating costs normalize, GOV scales further, and platform innovations like Bolt deliver incremental efficiency without eroding profitability.
“We believe execution has improved notably, with the improvement in QC AOV being an encouraging sign. We remain on the sidelines due to continued heightened competition in the sector. Our target price of Rs 450 implies an 11% upside from the current price. We reiterate our ‘Neutral’ rating on the stock,” Motilal said.
