Who is winning Zomato vs Swiggy fight? Ambit sees 50% rally on Zomato shares


Zomato’s gross merchandise value (GMV) in food ordering in the first of the year (H1 CY22) stood at 56%, which outgrew Swiggy at 40%. Based on brokerage Ambit’s calculation, Zomato had a around 55% market share versus Swiggy in food ordering.

“Given Swiggy has to do a tightrope walk of not losing market share but improve profitability, material competitive intensity increase appears less likely. This should help Zomato focus on efficiency, reflected in 2Q contribution margin improvement of 170 bps QoQ to 4.5%. We stay unconvinced on quick commerce but like Zomato’s food ordering business given long runway and roadmap towards profitability,” the note stated.

Brokerage and research firm Ambit has Buy tag on Zomato shares with a target price of 94 apiece, implying a potential upside of over 50% from current stock level. It expects Zomato (ex Blinkit) business to turn profitable in FY25E, but Blinkit to postpone overall entity profitability to FY27E.

“Zomato is smaller on restaurant count but larger on delivery agent count. Zomato GMV growth moderated to 23% YoY in 2QFY23 versus 56% in 1HCY22. So it would be important to watch in Prosus’ next disclosure if Swiggy has closed the market share gap or the market itself has moderated,” the brokerage added.

Prosus released points to a market share loss for Swiggy, pegging Zomato food delivery share at c.55% in 1HCY22. This appears to be highest market share for Zomato, in global brokerage Jefferies’ view.

“We see a strong case for Swiggy dropping its aggressive stance in food delivery in a bid to reduce its losses, and in the case that does not happen, Zomato may be induced to increase its aggression to drive growth,” Jefferies said.

With aggression continuing from Swiggy on discounting and its flagship program, Swiggy One, Zomato may come up with Pro membership in some form. “We already notice Zomato offering free or subsidised delivery (on future delivery against current order) recently, signalling this trend. We need to watch the space as newsflow is set to pick up in coming weeks,” it added.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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