Axis Capital saw a 20% upside in Swiggy shares; the stock ended 12% higher on Monday – CNBC TV18

Brokerage firm Axis Capital initiated coverage on shares of food delivery aggregator Swiggy Ltd. on Monday, December 16 with a “buy” recommendation and a price target of ₹640.

Axis Capital’s price target implied a 20% potential upside for Swiggy’s shares. The stock ended with gains of 11.5% on Monday.

Axis Capital’s price target is also the second-highest on the street for Swiggy, following CLSA’s ₹708.

The brokerage said that Swiggy presents a compelling investment opportunity as India’s second-largest quick-commerce cum food delivery player.

Axis Capital highlighted four factors behind its preference for Swiggy’s shares:

Food delivery and quick commerce remainunder penetrated and have a long growth runway.

Swiggy’s ambitious store expansion targets in quick commerce should aid its Gross Order Value (GOV) / topline growth along with better cost control.

Food delivery is a duopoly in India, with healthy growth and scope for margin improvement.

Swiggy’s ideation / innovation abilities and strengthened leadership team should help it stay a market leader.

Axis Capital expects Swiggy’s revenue to grow at a Compounded Annual Growth Rate (CAGR) of 38% over financial year 2024 – 2027 with food delivery and quick commerce growing at a 23% and 84% CAGR during the same period.

It expects adjusted Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) to be at ₹390 crore in financial year 2027, compared to a ₹1,840 crore loss in financial year 2024.

Axis Capital said that its price target of ₹640 is a 10% and 20% discount to Zomato and Blinkit.

Shares of Swiggy ended 11.6% higher on Monday at ₹594. The stock is now up 50% from its IPO price of ₹390.