BNP Paribas in its latest note on online food delivery platforms said it sees 39-48 per cent upsides on Eternal Ltd and Swiggy Ltd,  even as it has lowered its target multiples for the two stocks to reflect peer valuations and trimmed earnings estimates to factor in the increased macro risk. Rising quick commerce (QC) losses and competitive threats have weighed on the stock prices of Eternal Ltd and Swiggy Ltd, BNP Paribas said.  Considering the size of the market, it expects the market to remain competitive in the medium term with ecommerce companies such as Flipkart, Amazon, and BigBasket, omnichannel retailers such as Reliance and Avenue Supermarts Ltd as well as QC companies such as Eternal, Swiggy and Zepto looking to participate in the structural growth opportunity. 

Profitability levers

The brokerage sees see several levers for improving profitability, which include higher dark store utilisation as the number of orders per day increases and better negotiation with the brands as volumes increase. It said higher advertisement revenues, increase in average order value as more products get added and consumers start relying on QC for their regular grocery requirements, and operating leverage benefits may also improve profitability. 

Convenience becoming a habit

BNP Paribas said the urban consumer has shifted the first purchase impulse to QC platforms. What began as convenience is now becoming a habit, it said. With the large revenue opportunity ahead, the industry is in a land-grab phase with players densifying their store networks, expanding product assortment and using discounts as a lever, to gain market share, it said.

"We have lowered our target multiples to reflect peer valuations and trimmed earnings estimates to factor in the increased macro risk but continue to see strong upsides in both the names. We prefer Eternal," BNP Paribas said.

Swiggy, Eternal target prices 

For Eternal, the brokerage suggested a target of Rs 380 from Rs 420 earlier. This target at Friday's closing price of Rs 257.35 suggests 48 per cent potential upside. For Swiggy, the broking firm suggested a target of Rs 400 from Rs 490 earlier. The target suggests 39 per cent upside over Swiggy's prevailing price of Rs 287.30.

"However, most e-commerce companies are not profitable in India, which limits their ability to disrupt the market in a sustained manner, in our view. We have seen this play out in the food delivery space in the past, where we saw exits of some of the large players," it said.

New offerings

BNP Paribas said the quick commerce ecosystem is rapidly evolving from a grocery-led convenience service into a broader instant retail platform spanning multiple discretionary and service categories. 

While fresh food and daily essentials still anchor demand, platforms are aggressively expanding into electronics accessories, beauty and cosmetics, fashion basics, toys, pet care, and gifting categories.

These categories, it said, now account for a meaningful share of net order value (NOV) as companies push higher-margin products to improve unit economics.