Swiggy rallies 12% in 2 days after UBS initiates coverage with 'Buy' rating

Shares of food delivery major Swiggy rallied 5% to Rs 484.50 on the BSE in Wednesday’s intra-day trade, surging 12% in the past two days after UBS initiated coverage on the stock with a “Buy” rating, citing a “significant” valuation discount to rival Zomato. The brokerage has set a 12-month price target of Rs 515.

In the last three days, the stock price of Swiggy has soared 16 per cent, while, it recovered 20 per cent in four days. The stock had hit a record high of Rs 489.25 on November 14. Swiggy made its stock market debut on November 11. At 09:36 am; the stock was quoting 3.4% higher at Rs 477.25, compared to a 0.08% decline in the BSE Sensex.

Swiggy is among India's top two platforms in the online food delivery and quick commerce space, both fast-growing segments benefiting from urbanization and a growing middle class. While the company lost share in the calendar year 2023 (CY23) in both segments as it recalibrated its business strategies, the latest data indicates market shares starting to stabilize.

Analysts at UBS believe Swiggy is well positioned to benefit from the rapid growth in India's food delivery and quick commerce markets with an estimated Gross Merchandise Value (GMV) and revenue compounded annual growth rate (CAGR) of 35% and 29% over FY24-27e. With early signs of market share stabilization in food delivery, and recent investments and strategic changes in q-com leading to likely volume growth (and margin) recovery in q-com, analysts believe this discount should narrow over time. Therefore, we believe current valuations leave room for upside.