On Friday, ICICI Securities initiated coverage on Swiggy Ltd (SWIGGY:IN), a prominent player in the food delivery industry, with a Buy rating and a price target of INR740. The research firm's analysts pointed out the challenges and opportunities in the quick commerce segment, where competition has intensified, delaying profitability for companies involved.
Despite these challenges, Swiggy has been actively expanding its dark store operations, which is anticipated to strengthen its position and protect its medium-term prospects.
Swiggy's strategic initiatives, such as 'Swiggy Bolt', a service promising 10-minute food delivery, and 'Swiggy BLCK', a premium loyalty program, have been highlighted as key factors in the company's ability to gain market share in the food delivery sector. These services are expected to contribute to Swiggy's market share growth, as reflected in incremental mind share observed in survey data.
The analyst's commentary also included a comparative valuation assessment, where Swiggy's valuation was deemed more reasonable than its competitor Zomato (NS:ZOMT). Swiggy's business segments are trading at a 15-25% discount on enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) and enterprise value to sales (EV/Sales) ratios, which suggests a potentially attractive investment opportunity.
ICICI Securities' coverage on Swiggy underscores the company's strong execution capabilities and its strategic measures to differentiate itself in the highly competitive food delivery market. The firm's analysts believe these efforts will help Swiggy in consolidating its market position and enhancing its financial performance in the foreseeable future.
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