ET NEWS

International brokerage firm HSBC has reiterated its “Buy” call on Eternal, raising its target price to Rs 390 per share from Rs 340, citing clear scale and profitability leadership in both food delivery and quick commerce, while maintaining a “Hold” and Rs 430 target on Swiggy due to continued execution risk and slower margin progress in its quick commerce business. The new target price for Eternal forecasts an upside potential of 21% from the last close on the NSE.Eternal, which consolidates Zomato and Blinkit, continues to outperform Swiggy on both operational and financial metrics. In quick commerce, Blinkit’s net order value (NOV) surged by 125% year-on-year in Q1 FY26, far ahead of Swiggy’s Instamart, which rose by 75%. Blinkit also maintains a significant margin advantage—with contribution margins at 3% in Q1 FY26 compared to Instamart’s negative 4.6%.Operational leverage remains firmly on Blinkit’s side, with Instamart’s store throughput still only about 70% of Blinkit’s. Despite Swiggy’s improvement in average order values, HSBC notes that marketing and acquisition costs are likely to continue weighing down Swiggy’s QC margins over the next few quarters, limiting any near-term rerating potential for the shares.Balance sheet strength is another key differentiator in HSBC’s view. Blinkit and Eternal’s combined businesses sit on a cash surplus of about $2.2 billion, while Swiggy’s cash had dropped to $620 million by Q1 FY26, placing greater pressure to close the margin and cash-burn gap quickly. HSBC estimates that even in a bullish scenario, Swiggy’s quick commerce arm Instamart will only achieve EBITDA-level profits by FY31, whereas Blinkit is set to reach profitability much sooner. Material outperformance for Swiggy stock now hinges on significant execution improvement and rapid cash burn reduction.Financial projections from HSBC reflect these concerns. Eternal’s food delivery business is valued at a 45x forward EV/EBITDA multiple on an FY27 EBITDA estimate of roughly $276 million, while Swiggy’s food delivery is pegged at a 40x multiple on FY29 estimates of $260 million. For QC, Blinkit receives a 45x multiple on projected FY30 EBITDA of $880 million, significantly higher than Instamart’s 40x multiple.These differences drive HSBC’s strong preference for Eternal, where ongoing user growth, margin expansion, and robust cash reserves look set to reinforce its leadership in both food delivery and the faster-growing quick commerce market. For Swiggy, an attractive valuation is outweighed by concerns over rising competition, lagging margins, and cash burn worries, leaving its shares in “hold” territory for now.Eternal shares closed at Rs 323, lower by nearly 3% on the NSE. Swiggy shares also ended lower at Rs 419, down almost 2%. Eternal shares have risen 17% on a year-to-date basis, while Swiggy is down more than 20% over the same duration.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)