Buy Swiggy; target of Rs 400: ICICI Securities

Moneycontrol • 9 days ago

Original source

Key Investment Pillars

  • Swiggy's food delivery business (FD) saw a 17.7% YoY growth in Gross Order Value (GOV), with a 32bps QoQ/58bps YoY improvement in adjusted EBITDA margin, driven by advertising-led monetisation, delivery cost efficiencies, and increasing penetration of Bolt and 99-Store.
  • Quick Commerce (QC) experienced a 13.4% QoQ growth in Net Operating Value (NOV), driven by the addition of 1.3mn Monthly Transacting Users (MTUs), targeted pricing investments, differentiated assortment, and network expansion.
  • Management expects QC's losses to have peaked and forecasts a ~100bps QoQ improvement in adjusted EBITDA margin in Q3FY27, with a contribution margin guided at 0% to -1%.
  • The company's transition to an Indian-owned-and-controlled entity is expected to enable inventory ownership and deliver ~80bps of net margin benefit.

Thesis Validation Checklist

To validate the analyst's thesis, investors should watch for: sequential EBITDA margin gains in H2FY27, driven by the reversal of discounts and implementation of IOCC in Q3FY27; continued operating leverage supporting further margin expansion in FD; and successful scaling of Toing, which could accelerate combined FD marketplace growth to 25-30%. Additionally, investors should monitor the company's ability to maintain its FY27 FD growth guidance of 18-20%, excluding Toing, and its progress in achieving the stated steady-state adjusted EBITDA margin target of 5%.