The shares of food delivery and quick commerce rivals Swiggy and Eternal recorded notable gains on August 20 after DAM Capital initiated coverage on the two stocks with 'Buy' ratings and target prices implying strong upside potential.
Zomato-parent Eternal's shares jumped over 2 percent to hit an all-time high of Rs 331 apiece. DAM Capital kept a target price of Rs 400 per share, implying an upside potential of nearly 24 percent from the stock's previous closing price.
Swiggy shares surged more than 3 percent to hit an intraday high of Rs 422.20 apiece. DAM Capital has kept a target price of Rs 515 per share for the stock, implying an upside potential of nearly 26 percent from the stock’s previous closing price.
The brokerage said that the food businesses of Swiggy and Zomato have matured, hence it expects the firms to see margin expansion and strong free cash flow growth over the next three years, driven by lower capex an improved working capital efficiency, CNBC-TV18 reported.
This free cash flow which is expected over the next three years, will support the funding of quick-commerce operations for both these companies, the report further quoted the brokerage as saying. Eternal's Blinkit will likely reach profitability on EBITDA front by Q4 FY26, while Swiggy's Instamart will reach the same by Q4 FY28, the brokerage added.
DAM Capital projects Eternal and Swiggy to post a revenue growth of 42 percent and 28 percent respectively over the financial years 2025-2028. It also expects Swiggy to reach PAT profitability by financial year 2028, while Eternal is already PAT profitable.
Gross Order Value (GOV) for both the companies will likely increase 18-20 percent, while improving EBITDA margin will fuel a Compounded Annual Growth Rate (CAGR) of 30 percent and 60 percent for Eternal and Swiggy respectively over the next three years, DAM Capital further said, as per the report.
Also read: Our LIVE blog on stock market updates
Eternal shares have gained more than 6 percent in the past five days, and over 21 percent in the past one month. The stock has rallied nearly 41 percent in the past six months. It currently has a P/E ratio of 1,037.5.
Swiggy shares gained nearly 5 percent in the past five days, and over 6 percent in the past one month. The stock rose 12.5 percent in the past six months.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
