Swiggy share price gains 7% as UBS initiates coverage with 'buy' rating

Swiggy rallied 7 per cent on Tuesday after UBS initiated coverage on the stock with a “buy” rating, citing “significant” valuation discount to rival Zomato. The brokerage has set a 12-month price target of Rs 515. Shares of Swiggy ended at Rs 462, valuing the company at Rs 1.03 trillion.

 

“Our price target is derived from a combination of discounted cash flow and multiples-based sum of the parts, with assumptions that are broadly similar to what we have for Zomato. On our estimates, the stock's current market price implies FY27E enterprise value (EV) to core gross merchandise value of 1.2x and EV to core revenue of 6.2x - discounts of 38 per cent and 31 per cent respectively versus Zomato. With signs of market share stabilisation and improving unit economics, we expect these discounts to narrow,” wrote UBS analysts in a note. 

 

Zomato is currently valued at Rs 2.48 trillion.

 

“After losing share to Zomato in 2023 due to a slower Tier-2 expansion and success of Zomato's subscription programme, Swiggy has taken corrective measures with UBS Evidence Lab data showing the company's volume growth in 2024 tracking in line with industry. More importantly, this has been achieved without sacrificing margins, which have continued to improve through Q1FY25. We estimate Swiggy's online food delivery GMV growth over FY24-27E to be broadly similar to Zomato's (low-20s) with adjusted Ebitda margin reaching 2.8 per cent by FY27E,” the UBS note added.