Shares of Zomato have recovered over 270 per cent from its 52-week low of Rs 52.87. The multibagger stock touched an all-time high of Rs 199.55 on Wednesday trading session and ended 1.60 per cent higher at Rs 196.80.
For the third quarter, Zomato announced a better-than-expected performance in the December 2023 quarter. It reported a consolidated net profit of Rs 138 crore, compared to a net loss of Rs 347 crore in the year-ago period. The revenue from operations in the third quarter of current fiscal came in at Rs 3,288 crore, up 69 per cent, compared to Rs 1,948 crore in the year-ago period.
According to Parth Shah, Research Analyst, StoxBox, Zomato share prices have more than quadrupled from the lows of January 2023 on the back of drastic improvement in business performance. The food delivery segment continued to be on a strong footing, with Blinkit business recovery contributing to further traction.
"We anticipate Blinkit to be the star performer for the overall business going forward owing to new store additions, higher efficiency from existing stores, growing customer adoption of 10-minute delivery in groceries, growing order sizes and a wider assortment of product offerings," he said.
"The core food delivery business of the company is likely to further add on to the market share amid the addition of more supplier restaurants, growing acceptance of the “Zomato Gold” loyalty program and increasing consumer preference for online food ordering. The company is also expected to benefit from the monetization of the technology platform through platform fees," Shah added.
Kotak Institutional Equities has also retained 'Buy' rating on the stock with a revised SoTP-based fair value of Rs 210 against Rs 190 earlier, as it believes the momentum on the food delivery business remains reasonably healthy, with Zomato well-positioned to gain share in the near term, amid benign competitive intensity.
It said that Zomato is likely to report a healthy March quarter performance, driven by 25 per cent year-on-year (YoY) growth in food delivery gross merchandise value (GMV) and 99 per cent YoY growth in Blinkit GMV.
ICICI Securities has a 'Buy' rating on Zomato and a target price of Rs 300. According to the brokerage firm, the potential upcoming triggers for the stock include food delivery EBITDA margin crossing 4% of GOV watermark, market share gains in food delivery in hindi heartland states given the ‘veg only’ delivery fleet, Quick commerce turning profitable at the adj EBITDA level and fed rate cuts which could trigger large FII inflows into the stock.
Despite the recent rally in the share price, the brokerage firm believes that the risk reward skew remains compelling for Zomato, given the strong improvement in underlying metrics over the period.
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