Zomato shares climbed 5% today. Here's why

Shares of Zomato Ltd jumped 5 per cent in Monday's trade after the online food delivery platform reportedly upped its platform fee by 25 per cent to Rs 5 per order. Zomato introduced a platform fee --the flat charge that food delivery companies charge from customers across orders, of Rs 2 in August last year. It was later hiked to Rs 3 to improve margins and with an aim to become profitable.

Fuelled by record food orders on New Year’s Eve, the food delivery platform in January increased its mandatory platform fee to Rs 4 from Rs 3 per order across key markets.

Following the fresh hike, Zomato shares jumped 4.54 per cent to hit a fresh high of Rs 197.80 on BSE. Motilal Oswal Securities has 'Buy' rating on the stock with a target of Rs 220. Kotak Institutional Equities finds the stock worth Rs 210.

"We believe Zomato's quick commerce growth and margin potential are under appreciated and not fully priced in. Our detailed TAM and unit economics framework suggests FY24-29e GMV CAGR of c45%, $10.2 billion by FY29e, 20 per cent above consensus. More importantly, FY29e Ebitda margins should touch 9 per cent, almost 2x consensus. This drives our new street-high PT of Rs250. Maintain Buy," UBS said on April 12.

In another note this month, HSBC said it expects the GMV of Blinkit (which is owned by Zomato) is likely to nearly double in FY24. This brokerage suggested a target of Rs 215 on Zomato.

"Our estimate changes are driven by increased order and AoV growth. Moreover, we are constructive on the Blinkit business and expect positive surprises on GOV growth and profitability over the coming quarters. We are now factoring in better long-term growth for Blinkit. Over FY24-37, we now expect order and GoV (gross order value) CAGRs of c28% (previously 25 per cent) and 30 per cent (previously 27 per cent), respectively," HSBC said.

Zomato reportedly caters about 85-90 crore orders annually. In the December quarter, Zomato reported a 30 percent on-year jump in adjusted revenue.