Foreign brokerage CLSA said listed company Zomato Ltd is growing faster than Swiggy on key parameters, as retained its 'Buy' rating on the stock with a target of Rs 248 apiece. CLSA, which has been increasing its price targets for Zomato since May 2023 (Rs 80 then), said Swiggy’s overall GOV growth stood at 26 per cent for FY24. YoY. In comparison Zomato’s food delivery and quick-commerce vertical combined grew by 31 per cent during the same period
CLSA said Swiggy’s overall revenue growth of 24 per cent YoY was lower than Zomato’s adjusted revenue growth of 35 per cent YoY. This was, however, not fully comparable as Swiggy’s revenue includes some B2B sales.
CLSA said Swiggy’s core food delivery GOV grew in double digits for FY24 compared with a 19 per cent YoY growth in Zomato’s food delivery GOV. "If we assume a 10 per cent /20 per cent GOV growth for Swiggy’s food delivery GOV, it would be 74 per cent/80 per cent of Zomato’s food delivery GOV for Jan-Dec 2023," CLSA said.
Among other parameters, Swiggy had 387,000 active delivery partners (December 2023) against 4,19,000 for Zomato (December 2023). In terms of dark stores, Swiggy Instamart had 487 active dark stores (December 2023) compared with 526 for Blinkit (as of March 2024).
Investment risks in Zomato includes subdued urban consumer sentiment hindering growth, high competitive intensity, and regulatory strictness. Significant consumer adoption of the ONDC network could have some negative impact on take rates, which is also a key risk, it said.
CLSA values Blinkit at a 30 per cent discount to its 67 times PE multiple used for DMart. It believes, given profitability for DMart is much higher and the business model is more stable, such a discount for Blinkit is valid.
"For our target price’s other half, we base our DCF on 25 years of explicit forecasts to better model the growth opportunity for consumption in India, as we believe low penetration levels, rising incomes and a young population offer a long runway for sales growth. We discount our cashflow assumptions at a WACC of 14.4% and use a 4% terminal growth rate beyond our explicit forecasts," CLSA said.