Swiggy’s share price plummeted 7.8% to hit a fresh 52-week low of Rs 385.25 on Thursday. The stock lost 6.5% in the pre-open session implying an open at Rs 391. The fall in stock price came after the company’s net profit declined in the third quarter of FY25 on the back of dark store addition and increased competition.
Nuvama Institutional Equities, in a research note, said that the dark store expansion accelerated in the second half of the quarter and picked up further in January, creating a headwind for the next quarter. Swiggy’s growth was in line with expectations, but margins dipped significantly below consensus. “Instamart’s adjusted EBITDA margin fell 420bp QoQ while the contribution margin (CM) fell 270bp QoQ. The CM decline was partially due to dark store additions, though the magnitude of the miss suggests CM of existing stores also posted a compression,” said Nuvama. “Management reiterated its plans to more than double active dark store area to 4mf by Mar-25 (versus 1.5msf in Mar-24) by doubling store count and raising the store size.”
Another brokerage house, Motilal Oswal, said that the company’s net profit was hit by the aggressive dark store expansion. It expects that Swiggy will likely report a net profit margin of -19.5% in FY25, -11.4% in FY26, and -5.4% in FY27. It maintained its ‘Neutral’ rating on the stock with a target price of Rs 460. “We believe food delivery remains a stable duopoly; however, increased competition and aggressive dark store expansion have rebased profitability expectations for the quick-commerce sector in the near term,” said Motilal Oswal.
» Read More
