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On Thursday, Bernstein SocGen analysts adjusted their outlook on Swiggy Ltd (SWIGGY:IN), reducing the price target from INR635.00 to INR575.00, while maintaining an Outperform rating on the stock. The analysts noted that Swiggy presented a resilient quarter with solid performance in its Food Delivery (FD) segment, which grew 19% year-over-year (YoY), surpassing competitor Zomato (NSE:ZOMT)’s 17% YoY growth and further increasing its market share.
The company’s FD EBITDA (earnings before interest, taxes, depreciation, and amortization) improved by 90 basis points, attributed primarily to reduced delivery costs and higher take rates. However, Swiggy’s Quick Commerce (QC) division faced challenges due to an intensely competitive environment that led to increased marketing expenditures and advanced dark store costs.
Despite these challenges, QC Gross Order Value (GOV) saw an 88% increase YoY and a 16% rise quarter-over-quarter (QoQ), driven by a 10% increase in average order value (AOV). Nevertheless, margins suffered, with adjusted EBITDA for QC dropping to -14.8%, representing a 450 basis point decline QoQ.
Bernstein SocGen analysts remain optimistic about Swiggy’s prospects, expressing confidence in the company’s potential to emerge as a key player in India’s convenience economy. They suggest that any price correction should be viewed as an advantageous opportunity to invest in the stock, reaffirming their Outperform stance.
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