Broker’s call: Swiggy (Buy)

Swiggy is shifting its focus from growth at any cost to profitability. In the past four quarters, the company intentionally prioritised CM over unchecked expansion, as seen by the rebound of CM from a peak loss of about -5.6% in Q4-FY25 to break-even in Q1FY27. Moving forward, Swiggy aims to narrow the gap with Blinkit in terms of growth, with CM projected to fall within a guided range of zero to negative 1% EBITDA, resulting in a higher EBITDA loss.

QC has stabilised, while the core Food Delivery segment remains the main profit driver, with an EBITDA margin of around 3.1% and a robust 17.4% YoY expansion in GOV in Q1FY27. The cash flow generated by FD segment and treasury income should cover any operational losses from QC by FY28/1HFY29. At the current CMP, Swiggy's stock is valued at approximately 23x FY28 EBITDA, providing investors with QC and DO for free.

Consequently, the rating on the stock is upgraded to Buy, with an unchanged TP of ₹310, based on a 30x FY28e adjusted EBITDA for FD (approximately 15% discount to Zomato).