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The brokerage has an “outperform” rating on Zomato with a price target of ₹310 per share, which is slightly higher than its recent peak of ₹304, from which it has corrected 27% as of Monday’s close.
Bernstein said the competitive intensity of quick commerce has been a key point of debate, given land grab and the ongoing increase in marketing dollars across Zomato and its peers Swiggy and Zepto.
However, unlike the pre-IPO mode, the brokerage believes the focus currently is more balanced – growing quickly while delivering medium-term profitability.
Even if a more competitive scenario plays out in the next few quarters, it believes there is a rational limit to price competition given Swiggy’s lower margin structure.
The brokerage said it expects Zomato to continue to build on its quick commerce leadership.
Zomato is also in focus as it will be added to the Nifty 50 index in the upcoming semi-annual reshuffle, which will be effective March 28, 2025.
Earlier this month, the company also announced its decision to rebrand as Eternal Ltd, reflecting its evolving vision, as it looks to go beyond its food delivery roots, now encompassing multiple businesses including Blinkit, District, and Hyperpure.
The company’s net profit for the third quarter declined by 57% from last year to ₹59 crore, compared to a bottomline figure of ₹138 crore in the base quarter.
Its revenue increased 64% to ₹5,404 crore from the previous year.
Its EBITDA stood at ₹162 crore against ₹51 crore last year, while its margin expanded to 3% from the previous year’s 1.6%.
Zomato’s gross Gross Order Value (GOV) for the Food Delivery business grew by 17% from last year but only 2% sequentially. The management attributed the muted growth in the food delivery GOV to a broad-based demand slowdown.
For Blinkit, which is Zomato’s Quick Commerce business, revenue went up by 117% from last year and also increased by 21% when compared to the September quarter.
However, on an EBITDA basis, Blinkit was back in the red, reporting an EBITDA loss of ₹30 crore, in comparison to a positive EBITDA of ₹48 crore from the same quarter last year.
Blinkit also reported a net loss of ₹103 crore.
The management attributed the losses in the Quick Commerce business to pulling forward of the growth investments in the business that would have otherwise been made in a staggered manner.
The company said Blinkit would reach the mark of 2,000 stores by December 2025, a full year ahead of its initial guidance of December 2026. The business crossed the 1,000 stores mark this quarter.
Out of the 30 analysts that have coverage on the stock, 25 have ‘buy’ ratings, one has a ‘hold’ rating and four have ‘sell’ ratings.
Zomato shares were trading 2.67% higher at ₹228.66 apiece at 9.50 am on Tuesday, February 25. It has gained 39.3% in the past year.
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