Zomato rises 5% as brokerages remain upbeat on growth outlook

Brokerages upbeat on Zomato: Food aggregator Zomato's shares climbed 5 per cent to hit an intraday high of Rs 159.20 per share in early trade on Thursday, fuelled by optimistic sentiments from brokerages regarding the company's growth prospects.

The food delivery company's shares climbed 16 per cent over the past month, outpacing benchmark indices.

Brokerage firm Motilal Oswal's report highlights Zomato's robust performance in the December quarter (Q3FY24), with revenue reaching Rs 3,280 crore a 15 per cent quarter-on-quarter (QoQ) increase and a 69 per cent per cent year-on-year (YoY) surge. 

Despite challenges in the food industry, Zomato's delivery gross order value (GOV) grew by 6.3 per cent quarter-on-quarter. The report underscores Zomato's positive outlook, projecting a strong 70 per cent/41 per cent annual growth in financial year 2024/2025 (FY24/FY25), respectively. “We maintain our buy rating with a target price of Rs 170, implying 18 per cent potential upside,” Motilal Oswal said.

Brokerage firm Emkay's report echoes a similar sentiment, stressing Zomato's impressive execution across segments. With Blinkit driving major growth and set for adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) breakeven by first quarter of financial year 2025 (Q1FY25), the company anticipates consolidated adjusted revenue to grow by over 50 per cent annually in the coming quarters. 

“We increased our financial year 2025-2026 estimate (FY25-26E) earnings per share (EPS) by 1-2 per cent factoring-in December quarter performance, and revenue mix change. With better clarity emerging on product-market fit and roadmap to profitability for Blinkit, we now value it at one time financial year 2026 (FY26) GOV, compared to book value earlier. We retain ‘buy’ with a target price of  Rs 170,” brokerage firm added.

Meanwhile, Geojit's analysis underscores Zomato's strong revenue surge of 68.8 per cent year-on-year (YoY) to Rs 3,288 crore in Q3FY24. Notably, the company achieved positive EBITDA margin for the first time, standing at 1.6 per cent, signalling improved profitability amidst challenging market conditions.  

“Performance continued to be solid. Despite muted consumer demand, the food delivery business recorded healthy growth. A strong growth momentum in the segments, positive margin, and a leading market position are expected to support the superior performance. Hence, we reiterate our ‘buy’ rating on the stock with a rolled forward target price of Rs 174,” Geojit added.

JM Financial's report noted Zomato's strong quarter amidst tough macroeconomic conditions, projecting over 50 per cent annual growth in consolidated adjusted revenue for the near term. JM Financial analysts maintain a 'buy' rating on Zomato, anticipating continued strong performance in its food delivery and Blinkit segments. The target price for Zomato stock is Rs 200 per share.

Zomato's performance in the December quarter reflected resilience and adaptability in navigating market challenges, with brokerages bullish on its growth trajectory. As Zomato continues to expand its offerings and strengthen its market position, investor optimism remains high, driving the surge in its share price.

As of 10:18 am, shares of Zomato were trading over 2.14 per cent higher at Rs 155.45 per share.