Synopsis: Swiggy shares rose by 2.88% to ₹547.35, while Zomato's stock gained 0.76% to ₹290.60 in response to potential GST clarifications for Electronic Commerce Operators (ECOs). The surge also followed a positive coverage from Axis Securities, which rated Swiggy as a "Buy" with a target price of ₹640. Swiggy's robust growth strategy, particularly in food delivery and quick commerce, highlights significant opportunities in India’s underpenetrated e-commerce market.
Market Update:
Swiggy shares demonstrated a notable increase of nearly 3% in Monday's trading session.
This movement came on the heels of a report indicating that the government may soon provide clarity on input tax credits for ECOs, which include Swiggy and Zomato.
Additionally, Zomato's shares also saw moderate gains.
Axis Securities recently initiated coverage on Swiggy with a 'Buy' rating and a target price of ₹640.
This valuation reflects a 27% discount to Zomato's estimated EV/sales ratio, attributed to Swiggy's smaller scale and delayed profitability.
However, the discount is deemed reasonable given Swiggy's growth potential.
Analyst Insights:
Axis Securities highlighted that Swiggy operates in a duopoly with Zomato in India's food delivery market, which is expected to experience sustained growth.
Swiggy's quick commerce platform, Instamart, is also poised for expansion, targeting significant growth in gross order value (GOV) and revenue.
The company's innovative approach, bolstered by recent hiring of retail and e-commerce veterans, is set to improve operational efficiency and drive business performance.
Comparative Performance:
- Swiggy:
- Current Price: ₹547.35 (+2.88%)
- Target Price: ₹640
- Growth Areas: Food delivery and quick commerce
- Unique Strengths: Innovation and cost control
- Zomato:
- Current Price: ₹290.60 (+0.76%)
- EV/Sales Ratio: Higher due to consolidated operations
Conclusion:
Swiggy’s strategic focus on innovation, cost control, and market expansion positions it as a key player in India’s rapidly growing e-commerce sector.
With GST clarity expected to benefit the broader market, Swiggy's competitive pricing and operational strategies make it a compelling investment opportunity.
Both Swiggy and Zomato stand to gain from the expanding e-commerce ecosystem in India.
Disclaimer:
The information presented is for informational purposes only and should not be considered financial advice. Stock market investments carry risks, and readers are advised to conduct their own research or consult a financial advisor before making investment decisions. Neither the author nor the sources are responsible for any losses incurred.
