Swiggy shares rebound 28% from 52-week low ahead of Q1 earnings. What analysts say?
ADVERTISEMENT This may be fueled by expectations of strong revenue growth in its core food delivery business and improved performance in its quick commerce vertical, Instamart.
Domestic brokerage firm Kotak Institutional Equities has downgraded the stock to an 'ADD' rating and raised its sum-of-the-parts-based fair value estimate to Rs 420 from Rs 415 earlier.
However, it also noted that the stock is up by 25% from its May bottom and flagged this as a reason for its rating downgrade. 'The recent stock price increase results in a downgrade in rating to ADD,' the brokerage said.For Q1FY26, Kotak expects Swiggy to report a 19% year-on-year growth in food delivery gross merchandise value (GMV), outpacing Zomato's estimated 18% GMV growth for the same period.
Swiggy's food delivery GMV is projected at Rs 81 billion, supported by a stable take-rate and steady demand trends. However, it expects a sequential contribution margin (CM) decline of 30 basis points to 7.5%, driven by increased restaurant commissions, higher platform fees, and elevated delivery costs due to the onset of the monsoon.
ADVERTISEMENT While food delivery remains stable, Instamart's performance continues to weigh on profitability. Kotak estimates Instamart's GMV to rise 113% year-on-year, with revenue growth of 129% year-on-year.
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ADVERTISEMENT Despite this surge, Instamart is expected to report a contribution margin of -3.4% and an adjusted EBITDA loss of Rs 8.5 billion for the quarter, broadly in line with the Rs 8.4 billion loss recorded in Q4FY25.The brokerage noted, 'We expect Instamart to show meaningful improvement in EBITDA only in FY2027,' adding that FY2026 will likely be a year of 'depressed profitability for Instamart on account of steep store additions and high competitive intensity.'
ADVERTISEMENT Another brokerage firm, ICICI Securities, has also highlighted similar trends, projecting food delivery GMV growth of 18.5% year-on-year and 9.8% quarter-on-quarter for Q1FY26, with an adjusted EBITDA of Rs 2.2 billion and EBITDA margin of 2.7% of GOV.For Instamart, it expects GMV to increase 110.1% year-on-year and 22.6% sequentially, but pegs adjusted EBITDA loss at Rs 9.1 billion with a negative margin of 15.8%.Overall, the brokerage expects adjusted revenue to grow 8% quarter-on-quarter and 46.6% year-on-year, with adjusted EBITDA loss widening to Rs 7.9 billion from Rs 7.3 billion in Q4FY25 and Rs 3.5 billion in Q1FY25.
ADVERTISEMENT ICICI Securities also noted that 'Swiggy should marginally gain share in food delivery business,' and observed that e-commerce volume growth is accelerating from the company's lows of FY24/25.'We remain bullish on Swiggy,' added ICICI Securities.On the technical front, Ajit Mishra, SVP of Research at Religare Broking, noted, 'Swiggy has been witnessing a rebound after spending nearly six months in a corrective phase.'He added that following a breakout in June, the stock faced resistance near the Rs 395 level and is currently trading close to its neckline support.
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'It is crucial for the stock to hold the Rs 350–370 zone to maintain a positive bias, while the Rs 410–440 zone is expected to act as resistance. Participants should align their positions accordingly,' Mishra said.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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