Zomato stock has zoomed 135 percent in the past one year, more than doubling investors’ capital. In comparison, Nifty rose 28 percent during this period.
Zomato has served up another sizzling quarter as Q2FY25 revenues surged to Rs 4,800 crore, fueled by explosive growth in Blinkit, Hyperpure and Going Out segments, while Food Delivery continued on its steady path.
Though its EBITDA margin remained largely flat due to the company’s investments in scaling its infrastructure, brokerages dished out bullish calls as they are betting big on the immense growth potential for the online food giant.
Despite the robust Q2 earnings, Zomato shares were trading over 4 percent lower at Rs 245.30 on the NSE at 9:21 am.
HSBC has maintained a ‘buy’ rating on Zomato with a target price of Rs 330 per share as the company’s Q2 food delivery numbers met expectations. At the same time, its quick commerce segment outperformed projections.
HSBC believes Zomato’s recent fundraise will provide the necessary resources for the company to stay aggressive in an increasingly competitive market.
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Nomura has also given Zomato a ‘buy’ rating, setting a target price of Rs 320 per share. Zomato plans to focus on growing its quick commerce operations while aiming to maintain neutral EBITDA in the near term.
Zomato on October 22 reported a 389 percent jump in net profit to Rs 176 crore for the quarter ended September 2024. The company’s revenue during the same time increased 69 percent YoY as more customers ordered in. However, the company’s cash balance has reduced from Rs 14,400 crore in July 2021 to Rs 10,800 crore as of September 30.
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Analysts at Motilal Oswal said that Zomato’s food delivery business is stable, and Blinkit offers a generational opportunity to participate in the disruption of industries such as retail, grocery and e-commerce.
They kept their estimates largely unchanged as the increase in Blinkit gross order value (GOV) as a result of the dark store network expansion is offset by decreased profitability owing to increased capex and investments.
The brokerage projects Zomato’s PAT margins to improve to 4.7 percent in FY25, 8.6 percent in FY26, and 12.9 percent in FY27. It reiterated a ‘buy’ rating on the stock with a target price of Rs 330, implying a 28 percent upside from its recent close.
Zomato continues to scale its infrastructure and remains on track to achieve its dark store target of 2,000 by December 2026. The new District app is set to be launched within the next four weeks, which according to Emkay Global will consolidate its Going Out services in a single app with the aim of creating the third-large B2C business to emerge out of Zomato.
Also Read | Zomato Q2 net profit surges 389% to Rs 176 cr
The food aggregator has also announced a fundraise to the tune of up to Rs 8,500 crore, which ensures that it remains on a strong footing in this highly-competitive environment, the brokerage said as it maintained ‘buy’ call on the stock with target price of Rs 310 per share.
“We lower FY25-27E EPS by 17-26 percent factoring in Q2 performance, lower Blinkit margins, and higher ETR assumptions,” it added.
Zomato shares ended 3.5 percent lower at Rs 256.55 on the National Stock Exchange (NSE) in the previous session. The stock has risen around 106 percent so far this year, outperforming Nifty’s returns of 12 percent.
In the past 12 months, the counter has zoomed 135 percent, more than doubling investors’ capital. In comparison, Nifty rose 28 percent during this period.
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