Target: ₹480
CMP: ₹399.10
Swiggy reported a mixed Q1-FY26, with positives being outperformance vs Zomato in food delivery (gross order value) GOV growth and a sharp increase in quick commerce average order value (AOV). However, EBITDA margins were below our estimates in both segments. While overall revenue was ahead of our estimate, the losses were higher.
Food delivery margins had an element of seasonality, which was also witnessed in Zomato. In the case of quick commerce, despite the higher losses in 1Q, Swiggy reiterated its contribution breakeven target between 3QFY26 and 1QFY27. We trim our FY27/FY28E food delivery EBITDA by 30-40bps and QC EBITDA by 10-20bps as a percentage of GOV.
While the optical earnings cuts look sharp, there are only minor changes to our long-term assumptions, and our SoTP-based TP increases to ₹480 as we roll forward our valuation by a quarter to Jun-26. Maintain Outperform.
Key risks to the upside: Swiggy’s QC business is currently not getting any meaningful value due to its expected medium-term losses and competitive concerns. Achieving contribution breakeven over the next one year and a visible path to EBITDA breakeven in QC could be a significant catalyst. Swiggy has gained market share in FD in recent quarters and sustained market-share gains would also be seen as a positive.
To the downside: Inability to breakeven or reduce losses in QC is a key risk.
Published on August 4, 2025