Zomato shares jump 8% amid heavy trading volumes, m-cap tops Rs 50k crore mark

Shares of Zomato jumped as much as 8 per cent during the early trading session on Tuesday amid heavy trading volumes and demand by the traders on Dalal Street. The food delivery player regained the market capitalisation (m-cap) of Rs 50,000 crore as the stock rose. According to the data from BSE, about 66.8 lakh equity shares worth Rs 39.36 crore exchanged hands on BSE as of 10.30 am, which is higher than its two-week average trading volumes. On the other hand, 9.78 crore shares worth Rs 577.03 crore were traded on the National Stock Exchange (NSE). Shares of Zomato jumped about 8 per cent on Tuesday to 60.40, but the stock gave up some of its gains to trade at Rs 59 at 10.30 am and the company was commanding a market capitalization of little less than Rs 50,500 crore. The stock settled at Rs 55.96 on Monday. Shares of Zomato have surged about 20 per cent in the last one month, while the stock has appreciated about 50 per cent from its 52-week low. Despite this rise, Zomato is down 25 per cent in the last one year, while it is 21 per cent down from its issue price of Rs 76. The stock is still more than 60 per cent from its record high around Rs 160-mark. Listed in July 2021, Zomato is one of the leading online Food Service platforms. Its offerings include food delivery and dining-out services where customers can search and discover restaurants, order food delivery, book a table, and make payments for dining out at restaurants. The company had raised about Rs 9,375 crore from its initial stake sale. Last week, domestic brokerage firm Motilal Oswal Financial Services initiated coverage on Zomato with a 'buy' rating and target price of Rs 70 as it expects strong growth to be complemented by the company turning profitable over FY25, despite elevated competitive intensity. "The food delivery industry in India is all set to grow rapidly in the medium term driven by intensifying internet penetration, rising consumption and growth in urbanization. Zomato is a dominant player in the industry and we forecast the company to report 29 per cent revenue CAGR over FY23-25," said Motilal Oswal's maiden report on the stock. However, it views the acquisition of Blinkit as an additional risk and high attrition at senior management level remains a concern. Another brokerage, Kotak Institutional Equities, also has a buy rating on the stock with a target price of Rs 82. Zomato could see weaker sequential performance post the festive quarter, said JM Financial but remains among its key picks from the space. JM has kept its target price unchanged at Rs 100 with a 'buy' tag. "We are building a 4.3 per cent sequential decline in Food Delivery GOV in 4Q as we factor-in adverse impact of inflationary pressures on discretionary spending, increase in dine-in consumption and company’s focus on profitability. Factors that could impact volume growth include absence of ‘Gold’ in January, Navaratri in late March, and lesser days in the March Quarter," it said. At Consolidated business level we expect 140bps/150bps sequential improvement in reported EBITDA/adjusted EBITDA to -17.4 per cent and -12.1 per cent, respectively. Ex-Blinkit, adjusted EBITDA could be very close to breakeven. It reported net loss of Rs 343 crore (due to Blinkit and ESOPs) versus a net loss of 347 crore and Rs 352 crore in 3QFY23 and 4QFY22, respectively.