Zomato share price targets see upside revisions post Q1 results; here's why

The June quarter results of online food delivery giant Zomato Ltd were better-than-expected on many counts. The Zomato management guided for 20 per cent-plus growth in the short term in Food Delivery (FD) business and set a target to increase Blinkit’s dark store count from 639 in June quarter to 2,000 by end-CY26. Market analysts are largely positive on the stock post Q1 earnings and see up to 50 per cent potential upside on the counter.

Zomato is likely to balance its growth and margin ambitions in the near term, said Nomura India. The foreign brokerage does not see any risk to Zomato's medium-term aspiration of 4-5 per cent adjusted Ebitda margin in the FD segment. Nomura India is projecting a 20-23 per cent YoY growth in FD gross order value (GOV) in FY25-26, with contribution margin of 7.5 per cent, up 60 bps against FY24.

"We note that Zomato’s high growth path with improving profitability has significant room to go in both the FD and Q-commerce businesses. We raise our target price to Rs 280 factoring in higher long-term growth in Blinkit. We raise FY25-26F Ebitda by 26-60 per cent. Key risks include capital allocation of $1.5 billion cash and slowing growth in FD and Q-commerce businesses," it said.

MOFSL said Blinkit notoriously defies any attempts to value the stock fairly due to its feisty growth and the disruptive and evolving nature of quick commerce. Its gross order value (GOV) surged 100 per cent-plus YoY, and the brokerage believes Blinkit's GOV is the most important factor driving variation for a DCF-based price target.

MOFSL said Zomato should report profit margin of 4 per cent in FY25 and 8.7 per cent in FY26. Zomato’s food delivery business is stable, and Blinkit offers a generational opportunity to participate in the disruption of industries such as retail, grocery and e-commerce, it said.

"Our DCF-based valuation of Rs 300 suggests a 25 per cent upside from the current price. We reiterate our BUY rating on the stock," MOFSL said.

Nuvama said Zomato continues to deliver on its promise of strong growth along with improvement in profitability. The management, it noted, is not dialling down on growth ambition, citing 2,000 dark store addition target by 2026. This brokerage now value food delivery at $14 billion and Blinkit at $13 billion.

"Maintain ‘BUY’ with a revised target of Rs 285 (earlier Rs 245) based on a valuation rollover to Sep-26E," it said.

JM Financial said while ESOPs may inch up in the near term, the management noted that employee costs (inclusive of ESOPs) could fall to 6-8 per cent as a percentage of adjusted revenue in FY26 against 12 per cent in FY24.

"We raise earnings by 2-15 per cent over FY25-27 and raise our Sep’25 target price to Rs 260 against Rs 230 earlier. Maintain ‘BUY’," the brokerage said.

Among other brokerages, CLSA reportedly maintained 'Buy' on Zomato and raised its target price to Rs 350 per share. UBS suggested a target price at Rs 260 per share on the stock while Citi and Goldman Sachs see the stock at Rs 280 each. Axis Securities has a target price of Rs 287, Morgan Stanley at Rs 278, Bernstein at Rs 275 and Jefferies at Rs 275 per share.