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Our channel checks suggest an acceleration in QC growth heading into 2Q

Our channel checks ahead of the 2QFY27 earnings season suggest a pickup in quick commerce (QC) growth for both listed platforms, Eternal (Zomato) and Swiggy, as competitive intensity eases. We expect QoQ growth in net order value (NOV) to accelerate for both Blinkit and Swiggy Instamart in 2QFY27 (22.7%/14.4%), as compared to 1QFY27 (19.1%/3.1%). Festive seasonality and a step-up in store additions should further aid this momentum into 3QFY27E, in our view. Food delivery (FD) is expected to remain steady, with both players likely to report ~18- 22% YoY growth in gross order value (GOV) and a gradual improvement in margins. QC profitability, however, continues to diverge. We expect Blinkit to deliver ~1% adj. EBITDA margin as % of NOV. Instamart losses should remain elevated as competition for the #2 position remains intense, with e-commerce entrants continuing to discount aggressively through the festive period. That said, we view ~23% QoQ growth in QC NOV for the category leader as a clear positive for the industry.

We have revised our estimates for both platforms to reflect the stronger QC growth trajectory, while tempering our overall earnings estimate for Swiggy to account for elevated losses in QC as well as platform innovations (Toing). Our TP of INR430 implies a 28% upside for Eternal, and values Blinkit at ~50x FY28E EV/EBITDA. We revise our TP for Swiggy down to INR360, as we bake in elevated losses despite volume recovery in QC.

Food delivery: Growth holds; margins inch up

* We expect both Eternal and Swiggy to report ~20% YoY GOV growth in 2QFY27, broadly in line with the 18-21% range of the past few quarters (Exhibits 1 and 2).

* Swiggy could track at the lower end at ~18% YoY for the quarter. We expect Swiggy’s FD contribution margin to expand marginally QoQ to 7.8% of GOV from ~7.6% in 1QFY27. We expect adj. EBITDA margin at ~3.3% of GOV, which implies an FD adj. EBITDA of INR3.4b vs INR2.9b in 1QFY27. For Eternal, we expect FD adj. EBITDA margin of ~4.9% of GOV.

* At Swiggy, Toing (value food delivery) is now live in 50+ cities. That said, making unit economics work at low AOV’s remains challenging, and platform innovation losses are expected to increase as investments in Toing continue.

QC: Growth returns; the pie is expanding

* Blinkit: We expect NOV growth of ~23% QoQ in 2QFY27, up from ~19% in 1QFY27. We expect orders per day of ~4.5m in 2QFY27 (Exhibits 4 and 6).

* Instamart: We expect NOV growth of ~14% QoQ in 2QFY27, and project this momentum to continue into 3Q on stronger seasonality (Exhibits 5 and 7). We expect quality of growth to be better and predominantly user-led.

* We believe Swiggy’s pruning of low-MTV users is now behind it, with a renewed focus on user acquisition likely going forward. On competition, a pullback in intensity has eased pressure on listed players. Flipkart Minutes and Amazon Now, however, are running on deeply negative contribution margins through the festive quarter. We believe that subsidy-led growth by e-commerce players will be difficult to sustain once the festive period is behind us.

Valuation and view: Growth recovery supports our stance on both

* We continue to view FD as a stable duopoly. We value the FD business of Eternal at 35x FY28E EV/EBITDA and Swiggy at 32x FY28E EV/EBITDA.

* Eternal: Our TP of INR430 implies ~50x EV/EBITDA on FY28E Blinkit estimates, with a potential upside of 28%.

* Swiggy: Our TP of INR360 implies ~0.4x FY28E EV/NOV for the QC business, a ~68% discount to Eternal's multiple of 1.3x, with a potential upside of 29%.

* We reiterate BUY on both names. We prefer Eternal for Blinkit's scale leadership and path to profitability. We believe Swiggy offers optionality if Instamart closes the scale gap.

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