Zomato shares hit new highs ahead of Q1 results; check preview & target price

Food delivery platform Zomato is set to announce its quarterly results for the three-months ended on June 30, 2024. The brokerages expect a strong growth in topline with a multifold rise in the net profit for the quarter. Amid the expectations of a strong Q1 show, the stock hit its new highs.
 

Analysts tracking the stock believe that Ebitda performance on a quarter-on-quarter (QoQ) basis will be a major factor for the company. They believe that operation performance and profitability of Blinkit, rise in food delivery platform charges, management's commentary for the forthcoming quarters shall be the key for the stock.
 

A consensus estimate of brokerage expects Zomato to report a revenue around Rs 3,800-4,000 crore, rising 40 per cent YoY and 8-10 per cent sequentially. Ebitda may come in around Rs 150 crore, with Ebitda margins coming in the range of Rs 3.9-4.3 per cent for the quarter. The net profit me jump manifold on a yearly basis to Rs 175-240 crore range as per the brokerage estimates.
 

Kotak Institutional Equities expects Q1FY25 revenue growth to come in at 59 per cent YoY driven by 35 per cent YoY growth in food delivery revenues, 65 per cent YoY growth in Hyperpure revenues and 125 per cent YoY growth in Blinkit revenues. The brokerage has a buy rating on the stock.
 

"We model 20 bps QoQ expansion in food delivery CM to 7.7 per cent in 1Q; coupled with GMV increase this will result in 3.7 per cent Ebitda margin. We expect a minor sequential reduction in loss for the Blinkit business; we do not expect EBITDA break-even yet as a large (100+) dark store addition may be a drag on profitability," it said.
 

Shares of Zomato Ltd rose about 2 per cent during the trading session on Thursday to hit a new 52-week high at Rs 234 apiece. The total market capitalization of the company surged to Rs 2.05 lakh crore mark. The stock has surged and tripled its value from its 52-week lows.
 

Food delivery may post 6 per cent QoQ GOV growth, Blinkit would post a strong 14 per cent QoQ GOV growth. We expect sequential Adjusted Ebitda margin improvement in food delivery as well as Blinkit to be at 29bps/99bps respectively, compared to 29bps/159bps sequential improvement in 4QFY24, said Equirus Securities.
 

"Market share gain/loss in food delivery business; the QoQ MTU/ Order volume growth in food delivery business; customer delivery charges expansion in food delivery business; and net dark store addition for Blinkit shall be the key things to watch for," said Equirus, which has a 'long' rating on Zomato with a target price of Rs 240 on the stock.
 

While Blinkit should turn Adjusted EBITDA break-even by 1QFY25, in line with management guidance, we believe Zomato will prioritise growth investments hereon amidst growing competitive intensity. The fact that Zomato’s management has guided for adjusted Ebitda to hover around zero for the next few quarters is also likely indicative of this changing business environment, said JM Financial.

"Blinkit in our view remains the best placed QC platform to take on emerging competition basis strong execution done by the management in the past across food delivery as well as quick commerce businesses and robust balance sheet," the brokerage added.
 

Another domestic broker, Axis Securities has initiated its coverage on Zomato with a 'buy' recommendation and a target price of Rs 280. We are confident that Zomato's expansion in the Quick Commerce sector is supported by a consistent enhancement in profitability and a notable reduction in losses within the hyperpure and quick commerce domains, it said.