Who is winning the battle of Zomato vs Swiggy? Ambit says Zomato shares have potential for 50% upside

 

• According to brokerage Ambit, Zomato overtakes Swiggy in food ordering to lead the market share

In the first of the year (H1 CY22), Zomato's gross merchandise value (GMV) in food ordering was 56%, overtaking Swiggy at 40%. Based on brokerage Ambit's calculations, Zomato had about 55% market share in food ordering compared to Swiggy.

Swiggy has to work hard not to lose market share but improve profitability, with content appearing less likely to increase in competitive intensity. This will help Zomato focus on efficiency, which is reflected in the improvement in 2Q contribution margin by 170 bps QoQ to 4.5%. We remain unconvinced on instant commerce, but given a long runway like Zomato's food ordering business and a roadmap towards profitability," the note said.

Brokerage and research firm Ambit has given a Buy tag on Zomato shares with a target price of ₹94 per share, indicating a potential upside of over 50% from current stock levels. It expects the Zomato (former Blinkit) business to turn profitable in FY25E, but Blinkit will defer overall unit profitability to FY27E.

“Zomato is small in restaurant count but big in delivery agent count. Zomato GMV growth narrowed to 56% in 1HCY22 as against 23% YoY in 2QFY23. Hence it will be important to see in the next disclosures from Prosus whether Swiggy closes the market share gap or the market itself moderates," the brokerage said.

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Updated - 24 November 2022

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Pros issues points to market share loss for Swiggy, pegs Zomato food delivery share at c.55% in 1HCY22. In the view of global brokerage Jefferies, this appears to be the highest market share for Zomato.

"We see a strong case for Swiggy to abandon its aggressive approach in food delivery to reduce its losses, and failing which, Zomato may be prompted to increase its aggression," Jefferies said. Is."

With Swiggy continuing its aggressiveness on discounts and its flagship program, Swiggy One, Zomato may come up with a Pro subscription in some form or the other. “We have recently seen Zomato offering free or subsidized delivery (on future deliveries against existing orders), indicating this trend. We need to keep an eye on the space as the newsflow is going to intensify in the coming weeks."