Zomato Ltd on Friday reported a second straight quarter of profit in the September quarter. The stock rose 4.76 per cent to hit a fresh one-year high of Rs 121.95. The scrip is now up 102 per cent year-to-date.
The company posted a profit for the second quarter in a row on the back of strong revenue growth. The online food delivery platform reported a profit of Rs 36 crore for the September quarter compared with Rs 2 crore in June quarter and a loss of Rs 251 crore in the corresponding quarter last year. Zomato said its sales from operation jumped 71.46 per cent YoY to Rs 2,848 crore compared with Rs 1,661 crore in the same quarter last year.
Zomato said it was aiming for at least 100 new (net) stores within FY24, and should exit March 2024 with somewhere around 480 stores in total. Blinkit saw 29 per cent sequential GOV growth, it said. The growth was partly due to the low base effect, given the temporary disruption in the business in the previous quarter. On a YoY basis, the GOV growth was 86 per cent, as expected and in-line with the past, Zomato said.
For the quarter, Zomato added a net addition of 28 new Blinkit stores during the quarter, taking our overall store count to 411 stores as at the end of the quarter.
CLSA has raised the target to Rs 168 from Rs 120, translating to an upside of over 56 per cent from Friday’s close. “Zomato reported sales and PAT of -1 per cent and/+8 per cent versus Bloomberg consensus, with 20 per cent YoY gross order value (GOV) growth in food delivery and 86 per cent in quick commerce,” the brokerage’s note added.
In its results review note’, CLSA said that the acceleration in gross order value (GOV) was primarily driven by an increase in monthly transacting customers (MTC). Further, higher use frequency, too, drove improved contribution. With greater confidence in profitability, especially for Blinkit, the brokerage upgraded the rating.
Revenue from operations was Rs 2,848 crore for the quarter. In the year-ago period, the figure stood at Rs 1,661 crore. Total expenses were Rs 3,039 crore during the quarter under review. In the year-ago quarter, it stood at Rs 2,092 crore, according to a regulatory filing.
Zomato, with its last two results, has clearly shown that growth remains its top priority, said Nuvama Institutional Equities. “Strong growth across business gives us confidence in Zomato’s ability to maintain its lead in food delivery as well as gain market share in quick commerce,” it said.
The brokerage values Zomato’s food delivery business at Rs 93 per share while it finds quick commerce business worth Rs 27 per share, as it upped its target on the stock to Rs 140 from Rs 110 earlier.
“Zomato’s revenue growth was much stronger than expected as all businesses continued to grow at full throttle. We are increasing our revenue growth estimates, as we believe management is aiming at higher-than-anticipated growth while we are lowering our profitability expectation, as management will invest to drive growth,” it said.
Motilal Oswal said it remained positive about Zomato’s long-term growth opportunity and does not expect competition to intensify further despite the entry of ONDC in the space.
“We now estimate Zomato to turn positive on reported EBITDA by Q4FY24 (earlier Q4FY24) and deliver 4.1 per cent Ebitda margin in FY25,” it said.
Kotak Institutional Equities said the food delivery GOV growth guidance of 25-30 per cent YoY in Q3FY24 indicates some consumption recovery and market share gain. The brokerage has upgraded its FY2024 26 per cent revenue estimates by 10-11 per cent, driven by all three segments.
“Adjusted Ebitda remains relatively unchanged, as we also model higher fixed costs. We assume higher ESOP costs for FY2024-25, which drove bulk of the EPS cut for FY2024- 25. Higher revenue forecasts, especially for Blinkit, led to a revised SoTP-based fair value of Rs 130 from Rs125 earlier,” Kotak said.
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