Motilal Oswal upgrades Swiggy to ‘buy’ rating, sees 32% upside potential. Should you invest?

Food delivery sector gets a fresh boost as the domestic brokerage firm Motilal Oswal sees stronger growth, easing competition, and improving profitability. The brokerage has upgraded its rating on Swiggy to ‘buy’, assigning a target price of Rs 560, implying a potential upside of 32%. It also maintained its ‘buy’ rating on Eternal with a revised target price of Rs 420, suggesting a 29% upside from current levels.

In its latest sector update, Motilal Oswal revised upward its food delivery (FD) growth estimates for both Swiggy and Zomato to 21-23% for FY26-FY27, up from the earlier estimate of 19-20%. This bullish revision is driven by faster-than-expected top-line recovery, improving unit economics, and greater visibility on profitability.

To reflect this stronger growth outlook, the brokerage has raised its valuation multiple for food delivery businesses from 27x to 35x FY27E adjusted EBITDA. The move underscores rising investor confidence in the sector’s long-term profitability trajectory.

Quick Commerce turning the corner

Quick commerce platforms like Instamart and Blinkit are showing signs of moving faster toward profitability. Motilal Oswal has upgraded its profitability outlook, driven by easing competition and a slowdown in dark store expansion after peaking in Q4FY25.Lower customer acquisition costs, thanks to reduced discounting, and GST reforms encouraging adoption in non-metro areas are also supporting this trend. These factors combined are expected to boost contribution margins in the coming quarters.

Macro tailwinds strengthen the bull case

Motilal Oswal sees the broader environment becoming increasingly supportive for both food delivery and quick commerce. After stagnating at 17–18%, food delivery growth is expected to pick up over the next 2–4 quarters. This renewed momentum is likely to be driven by the upcoming festive season, the positive impact of recent GST reforms on demand and compliance, and a more stable, sustainable competitive landscape.

Target price revisions

Riding on the back of these positive developments, Motilal Oswal has revised its target prices for key players in the space. Swiggy has been upgraded to a ‘BUY’ rating, with a new target price of Rs 560, indicating a potential upside of 32%. Meanwhile, Eternal’s BUY rating has been maintained, with a revised target price of Rs 420, implying a 29% upside from current levels.

Share price update

During Friday’s trading session at 9.40 am, both food delivery stocks showed positive momentum. Swiggy shares rose 1.5% to Rs 429.60, while Eternal shares gained 1.8%, at Rs 332. Over the past three months, both stocks have already seen significant gains, with Swiggy up 17% and Eternal (Zomato) surging 28%.