Eternal shares still a 'Buy' amid Q4 Blinkit loss, high competition?  

Shares of Eternal Ltd (erstwhile as Zomato) are in focus today as the online food delivery platform reported a 77.71 per cent year-on-year (YoY) plunge in its consolidated net profit for the January-March 2025 quarter but the losses at Blinkit came in lower than expectations. 

Eternal Ltd reported in line numbers in Q4FYY25 with revenue roughly at Rs 5,830 crore against the consensus estimate of Rs 5,820 crore. Ebitda margin came in at 1.2 per cent, down 180 bps sequentially, which was below the consensus estimate of 1.7 per cent. PAT at Rs 39 crore was in line with estimate of Rs 42.10 crore.

"Blinkit reported lower-than-expected losses despite an accelerated pace of dark store additions in Q4. Notably, contribution margin improved, even with dilution from newly opened dark stores. With the store expansion cycle likely peaking, we are forecasting adjusted Ebitda losses shall decline from the next quarter. Maintain ‘BUY’ with a revised target of Rs 290 (earlier Rs 300)," Nuvama said in a note.

JM Financial said the management’s cautious tone alluding to expected rise in competitive pressures over the near term could spook the market.

"We on the other hand, continue to believe that long term investors should use any volatility in the stock due to such concerns to build sizeable position in the name. This is because we expect Blinkit to materially slowdown expansion of warehousing capacity and dark stores from 2QFY26 onwards – that in turn should lead to meaningful operating leverage benefit and likely peaking-out of its losses in 1QFY26," JM Financial said.

Eternal's Food delivery’s contribution margin rose to 8.6 per cent in Q4 from 8.5 per cent in Q3FY25, whereas adjusted Ebitda margin as percentage of GOV improved 10 basis points QoQ to 4.4 per cent. 

"Despite rising competitive intensity and rapid dark store expansion, Blinkit’s contribution margin improved 10 bps QoQ to 3.1 per cent in Q4FY25. However, adjusted Ebitda margin (as % of GOV) fell 60 bps QoQ to minus 1.9 per cent, driven by higher marketing investments aimed at accelerating new customer acquisition," Nuvama said. 

Blinkit added 40 per cent of its total network of 1,301 stores over past two quarters. These newly opened stores are currently underutilised and in bottom tier of profitability curve, Nuvama noted.

The management expects competitive intensity to increase going ahead as other player enter this category. 

Adjusted Ebitda loss of Hyperpure rose marginally in Q4FY25. Going-out adjusted Ebitda loss widened as it remains under investment phase. 

Nuvama noted that losses in others segment rose due to investment in Bistro and Nugget, as t tweaked Ebitda by +11.1 per cent and minus 6.1 per cent for FY26E/27E. It now values Eternal's food delivery segment at $19 billion and Blinkit at $10 billion," Nuvama said.

"Further upside to margins can come, as and when the business starts to move to an inventory led model. Zomato’s (food delivery) GOV growth in 4Q was also steady at 16 per cent YoY (ahead of JMFe of 15 per cent YoY), despite adverse impact of leap year in the base qtr and management decision to delist ~19k restaurants from the platform on account of quality issues. Eternal remains our top pick in the hyperlocal delivery space," JM Financial said.