Swiggy's share price soars 7% after UBS issues 'Buy' Rating

Shares of Swiggy surged 7% on Tuesday, closing at Rs 462, which values the company at Rs 1.03 trillion. This spike came after UBS initiated coverage on the stock with a “buy” rating, highlighting a “significant” valuation discount compared to its rival, Zomato. UBS has set a 12-month price target of Rs 515 for Swiggy.

“Our price target is based on a combination of discounted cash flow and multiples-based sum of the parts, with assumptions similar to those we have for Zomato. At the current market price, Swiggy’s FY27E enterprise value (EV) to core gross merchandise value (GMV) is 1.2x, and EV to core revenue is 6.2x, representing discounts of 38% and 31% respectively compared to Zomato. With signs of market share stabilization and improving unit economics, we expect these discounts to narrow,” stated UBS analysts in their note.

Zomato is currently valued at Rs 2.48 trillion.

“After losing market share to Zomato in 2023 due to slower expansion into Tier-2 cities and the success of Zomato’s subscription program, Swiggy has implemented corrective measures. UBS Evidence Lab data indicates that Swiggy's volume growth in 2024 is tracking in line with the industry. More importantly, this growth has been achieved without compromising margins, which have continued to improve through Q1FY25. We project Swiggy's online food delivery GMV growth over FY24-27E to be similar to Zomato’s, in the low-20s, with an adjusted EBITDA margin reaching 2.8% by FY27E,” the UBS note added.