Brokerage upgrades Swiggy to buy rating with target price of Rs 310

Brokerage firm Anand Rathi has upgraded the food delivery stock Swiggy to a buy rating while keeping its target price unchanged at Rs 310. The valuation is based on 30 times the estimated adjusted EBITDA for FY28 after accounting for financial obligations, and it reflects a 15% valuation discount compared to Zomato.

Business Shift

Swiggy is moving away from a model that sacrifices profitability for faster growth. Over the past four quarters, the company focused on improving its contribution margin rather than pursuing growth at any cost. As a result, its contribution margin improved from a loss of around 5.6% in Q4FY25 to breaking even in Q1FY27. Additionally, Swiggy recently restricted foreign shareholding to 49.5%, which gives Instamart the compliance clearance to move towards a direct inventory-led model by Q3.

Instamart Strategy

Instamart is leveraging asset efficiency with about 1,171 active dark stores across 125 cities, adding roughly 28 dark stores in Q1FY27 compared to 200 additions by Blinkit. The current network can double its gross order value without physical expansion. Furthermore, non-grocery categories now account for about 30% of Instamart's business, bringing in higher ticket sizes and better retail margins than grocery staples. Private-label brands like Noice also drive positive contribution-margin inflows.

Market Performance

Swiggy shares have remained under pressure over the longer term despite a marginal gain of 0.11% in the past week. The stock declined 15.67% over the past month, fell 41.07% year-to-date, and dropped 46.72% over the past one year.

Context

Brokerage upgrades and target prices help investors understand how financial experts view a company's future earnings potential and market position. Stock valuations in the food delivery sector often depend heavily on a balance between rapid market expansion and achieving operational profitability.