Eternal Expected to Outperform Swiggy in June Quarter

Eternal is anticipated to perform better than Swiggy in the upcoming June quarter, as highlighted by brokerage firm Kotak Institutional Equities. Additionally, Blinkit is projected to surpass Instamart in the quick commerce sector. Kotak forecasts that Eternal’s food delivery business will maintain robust performance, while Blinkit is set to sustain its impressive growth trajectory.

Growth Estimates for Eternal and Blinkit

Kotak estimates that Eternal’s food delivery net order value (NOV) will increase by 18% year-on-year, reaching Rs 10,581 crore. In a significant turnaround, Blinkit is expected to witness an 88% rise in NOV, potentially hitting Rs 17,277 crore. Furthermore, Blinkit is predicted to add approximately 225 dark stores in the quarter, bringing its total to nearly 2,470 locations.

Financial Projections for Blinkit

According to Kotak, Blinkit’s adjusted EBITDA is anticipated to enhance to roughly Rs 102 crore, a substantial increase from Rs 37 crore in the previous quarter. However, there may be slight pressure on Eternal’s food delivery margins due to elevated delivery costs, increasing fuel prices, and reduced availability of delivery personnel during the early monsoon period. Despite this, the food delivery segment is expected to report an EBITDA margin of 5.2%.

Swiggy’s Projection and Market Position

For Swiggy, Kotak believes that the food delivery segment will remain stable, with a gross order value (GOV) projected to rise by 20% year-on-year, reaching Rs 9,703 crore. Revenue is set to climb by 25%, driven by a surge in platform fees.

Comparative Growth with Instamart

In contrast, Instamart is expected to grow at a slower speed compared to Blinkit. Kotak predicts that Instamart’s GOV and NOV will increase by 49% and 41% year-on-year, respectively, while a sequential NOV growth of 4.1% is projected, in comparison to Blinkit’s anticipated 20% rise. It is expected that Instamart will achieve contribution margin breakeven during the quarter; however, the business is still likely to report an adjusted EBITDA loss of about Rs 730 crore, slightly better than the Rs 858 crore loss reported in the previous quarter.

Investment Recommendations

Kotak has maintained its ‘Buy’ recommendation for both Eternal and Swiggy, with a fair value estimate of Rs 385 for Eternal and Rs 370 for Swiggy. The brokerage asserts that Blinkit is strategically positioned in the quick commerce market, aided by its effective execution, rapid store expansion, and improving profitability. Key areas to monitor during the announcement of their June quarter results include management’s insights regarding competition, pricing strategies, and the pace of profitability enhancement.