SUMMARY
Last week Zomato posted its third straight profitable quarter as it consolidated PAT almost quadrupled to INR 138 Cr, led by a strong growth momentum in its quick commerce business, Blinkit
Several brokerages including Jefferies, Nuvama, HSBC and Kotak, have also increased their price targets (PTs) on Zomato following the Q3 results
After rallying over 100% last year, Zomato shares have already gained 25% year to date in 2024
Continuing its rally post the strong Q3 FY24 earnings, shares of foodtech major Zomato jumped as much as 6.2% during the intraday trading on Monday (February 12) to touch a fresh 52-week high at INR 158.7 on the BSE.
The company reported its third straight profitable quarter last week. Its consolidated profit after tax (PAT) almost quadrupled to INR 138 Cr, led by a strong growth momentum in its quick commerce business, Blinkit.
While the gross order value (GOV) of its food delivery business grew a mere 6.3% sequentially to INR 8,486 Cr in Q3, Blinkit witnessed a 28% QoQ growth in GOV to INR 3,542 Cr.
Supported by the company’s Q3 earnings, its shares gained almost 6.3% in the two previous trading sessions.
Several brokerages including Jefferies, Nuvama, HSBC and Kotak, have also increased their price targets (PTs) on Zomato following the Q3 results.
HSBC increased its PT on the stock to INR163 from INR150 earlier, which implies an upside of 9% to the stock’s last close on Friday.
“In the medium term, we expect a further increase in take-rates and dilution in Gold proposition to drive the current EBITDA margins of 3% to the 4-5% range; this is likely to be a sustainable long-term profitability range for the business,” the brokerage said.
On the Blinkit side, HSBC sees growth to continue to be driven by top the 10 cities in the medium term, as quick commerce penetration improves and there is a market share shift from mom-and-pop stores to quick commerce.
“Currently, Blinkit is mostly attracting customers’ sales promotion budgets and we see addressable spend growing materially if the company is able to target these customers’ corporate level marketing spend,” it added.
On the other hand, Jefferies raised its PT on the stock to INR 205 from INR 190 earlier while Kotak Institutional Equities increased its fair value to INR 190 from INR 160 earlier.
“Zomato’s medium-term revenue guidance of 40% and food delivery revenue growth guidance of 20% implies Blinkit can grow at a rapid 60-70% YoY growth rate in the next 2-3 years,” said Kotak.
Of 27 brokerages covering the stock, 24 of them have a ‘buy’ or higher rating on Zomato.
Its shares rallied today amid reports emerged that a Delhi court has summoned the company in a civil suit seeking a restraining order against it for allegedly engaging in the “false and fraudulent” practice of delivering fresh food from iconic restaurants under its sub-category, ‘Dilli ke Legends’.
After rallying over 100% last year, Zomato shares have already gained 25% year to date in 2024. By 2.40 PM IST, the shares were trading 3.6% higher at INR 154.9 on the BSE on Monday.
