Zomato’s share took a 6% hit following the announcement of its Q4 results

Zomato’s share price experienced a 6% decline in early trading on Tuesday following the release of its Q4 results. Zomato shares dropped by as much as 5.98% to ₹182.10 each on the BSE.

The food delivery platform reported a consolidated net profit of ₹175 crore in the fourth quarter of FY24, a significant improvement from the ₹188 crore loss recorded in the same period the previous year. The net profit saw a 27% increase from ₹138 crore in the December quarter.

Zomato website

Zomato’s revenue from operations in Q4FY24 surged by 73% to ₹3,562 crore compared to ₹2,056 crore in the previous year. Gross order value (GOV) for the March quarter witnessed a 51% year-over-year rise to ₹13,536 crore across B2C businesses.

On the operational front, the company achieved an EBITDA of ₹86 crore, marking a notable improvement from the ₹226 crore loss reported in the same period last year. Additionally, Zomato’s quick commerce arm, Blinkit, attained operational EBITDA break-even in March 2024.

Despite the share price decline, analysts remain optimistic about Zomato’s prospects, with some even raising their target prices on the stock due to the continued strong performance of Blinkit.

Emkay Global Financial Services

Emkay Global Financial Services noted that Zomato achieved steady operational results, with revenue surpassing their estimates. However, there was a margin miss due to higher-than-anticipated ESOP costs.

The brokerage firm mostly retained its earnings per share (EPS) estimates for FY26E but adjusted down FY25E EPS by approximately 20%. This adjustment accounted for the slower profitability of Blinkit resulting from an aggressive store addition plan and increased ESOP costs.

Emkay Global Financial Services maintained a ‘Buy’ rating for Zomato with a share price target of ₹230 per share. This valuation was based on a sum-of-the-parts (SOTP) basis, with food delivery valued at ₹121 per share (DCF basis), Blinkit at ₹93 per share (DCF basis), and cash & other investments at Rs17 per share (BV).

Nuvama Institutional Equities

Nuvama Institutional Equities reported that Blinkit intends to increase its dark store count from 525 in Q4FY24 to 1000 by the end of FY25. While this move may have a short-term impact on profitability, it is expected to solidify Blinkit’s position as the leading player in quick commerce.

The valuation of Zomato by Nuvama Institutional Equities utilizes a sum-of-the-parts (SOTP) approach. It assigns a value of $10 billion to food delivery and $13 billion to Blinkit. This valuation was upgraded due to Blinkit’s faster-than-anticipated growth and its evident leadership in the quick commerce segment.

Nuvama Institutional Equities reaffirmed their ‘Buy’ rating on Zomato shares and increased the target price to ₹245 per share from the previous ₹180.

Elara Capital

Elara Capital expressed continued confidence in Zomato, emphasizing its strong position in the food industry. They anticipate Zomato to maintain an adjusted EBITDA compound annual growth rate (CAGR) of 47% from FY24 to FY26, supported by Blinkit’s market leadership and superior execution, particularly in terms of customer experience such as timely delivery and diverse product offerings.

The brokerage revised upward their consolidated revenue estimates by 22% and 33% for FY25 and FY26 respectively, driven by the robust growth of Blinkit and Hyperpure. However, they only upgraded their consolidated earnings estimates by 7% and 3% for FY25 and FY26, citing higher ESOP charges and lower Blinkit EBITDA due to its expansion focus.

Maintaining their ‘Buy’ rating, Elara Capital increased Zomato’s share price target to ₹280 from ₹250.

As of 9:20 am, Zomato shares were trading at ₹184.10 on the BSE, reflecting a 4.96% decrease.

Disclaimer: The opinions and suggestions expressed above belong to individual analysts or brokerage firms, and do not represent the views of Digital Marketing Port. We recommend investors to consult certified experts before making any investment decisions.

Leave a Comment