Zomato shares surged over 4% in early trading today after brokerage HSBC reaffirmed its ‘buy’ rating, citing the company’s lead over Swiggy in growth and profitability across its food delivery and quick commerce segments.
The͏͏ stock͏͏ rose͏͏ by͏͏ 4.4%͏͏ to͏͏ INR͏͏ 278.15͏͏ on͏͏ the͏͏ BSE͏͏ after͏͏ HSBC͏͏ increased͏͏ its͏͏ price͏͏ target͏͏ from͏͏ INR͏͏ 260͏͏ to͏͏ INR͏͏ 330͏͏ per͏͏ share,͏͏ indicating͏͏ a͏͏ potential͏͏ upside͏͏ of͏͏ nearly͏͏ 24%͏͏ from͏͏ the͏͏ previous͏͏ close.
Year-to-Date͏͏ Growth͏͏ Outpaces͏͏ Sensex:
Notably,͏͏ shares͏͏ of͏͏ Deepinder͏͏ Goyal-led͏͏ Zomato͏͏ have͏͏ surged͏͏ over͏͏ 122%͏͏ year-to-date,͏͏ significantly͏͏ outperforming͏͏ the͏͏ Sensex,͏͏ which͏͏ has͏͏ risen͏͏ just͏͏ under͏͏ 13%͏͏ in͏͏ the͏͏ same͏͏ period.
Continue͏͏ Exploring:͏͏ Zomato shares͏͏ soar͏͏ to͏͏ all-time͏͏ high͏͏ of͏͏ INR͏͏ 298.05͏͏ amid͏͏ broader͏͏ market͏͏ rally
Strong͏͏ Profitability͏͏ and͏͏ Revenue͏͏ Growth͏͏ in͏͏ Q1͏͏ FY25:
The͏͏ stock’s͏͏ bull͏͏ run͏͏ has͏͏ been͏͏ driven͏͏ by͏͏ Zomato’s͏͏ improving͏͏ profitability͏͏ and͏͏ top-line͏͏ growth.͏͏ In͏͏ the͏͏ June͏͏ quarter͏͏ of͏͏ FY25,͏͏ the͏͏ company͏͏ reported͏͏ a͏͏ sharp͏͏ increase͏͏ in͏͏ consolidated͏͏ net͏͏ profit,͏͏ rising͏͏ to͏͏ INR͏͏ 253͏͏ crore͏͏ from͏͏ INR͏͏ 2͏͏ crore͏͏ in͏͏ the͏͏ same͏͏ period͏͏ last͏͏ year.
Continue͏͏ Exploring:͏͏ Zomato’s͏͏ net͏͏ profit͏͏ jumps͏͏ multi-fold͏͏ to͏͏ INR͏͏ 253͏͏ Cr͏͏ in͏͏ Q1,͏͏ marks͏͏ fifth͏͏ consecutive͏͏ profitable͏͏ quarter
Meanwhile,͏͏ revenue͏͏ from͏͏ operations͏͏ surged͏͏ 74%͏͏ to͏͏ INR͏͏ 4,206͏͏ crore͏͏ in͏͏ Q1͏͏ FY25,͏͏ compared͏͏ to͏͏ INR͏͏ 2,416͏͏ crore͏͏ in͏͏ the͏͏ same͏͏ quarter͏͏ last͏͏ year.
Zomato Leads͏͏ Over͏͏ Swiggy:
HSBC͏͏ analysts͏͏ highlighted͏͏ that͏͏ Zomato͏͏ maintains͏͏ its͏͏ dominance͏͏ in͏͏ the͏͏ food͏͏ delivery͏͏ and͏͏ quick͏͏ commerce͏͏ markets,͏͏ surpassing͏͏ IPO-bound͏͏ Swiggy.͏͏ While͏͏ competition͏͏ in͏͏ the͏͏ food͏͏ delivery͏͏ sector͏͏ appears͏͏ to͏͏ be͏͏ stabilizing,͏͏ there͏͏ is͏͏ still͏͏ significant͏͏ potential͏͏ for͏͏ Zomato͏͏ to͏͏ enhance͏͏ its͏͏ take͏͏ rates.
Conversely,͏͏ Swiggy,͏͏ which͏͏ recently͏͏ secured͏͏ shareholder͏͏ approval͏͏ to͏͏ raise͏͏ the͏͏ fresh͏͏ issue͏͏ component͏͏ of͏͏ its͏͏ IPO͏͏ to͏͏ INR͏͏ 5,000͏͏ crore,͏͏ trails͏͏ behind͏͏ Deepinder͏͏ Goyal’s͏͏ company͏͏ in͏͏ the͏͏ food͏͏ delivery͏͏ market͏͏ in͏͏ terms͏͏ of͏͏ active͏͏ user͏͏ base,͏͏ gross͏͏ order͏͏ volume,͏͏ and͏͏ order͏͏ frequency͏͏ growth,͏͏ according͏͏ to͏͏ the͏͏ brokerage.
Swiggy͏͏ Struggles͏͏ in͏͏ Quick͏͏ Commerce:
The͏͏ report͏͏ also͏͏ highlighted͏͏ that͏͏ Swiggy’s͏͏ quick͏͏ commerce͏͏ division,͏͏ Instamart,͏͏ is͏͏ finding͏͏ it͏͏ challenging͏͏ to͏͏ compete͏͏ with͏͏ Zomato’s͏͏ Blinkit.͏͏ However,͏͏ there͏͏ remains͏͏ potential͏͏ for͏͏ recovery͏͏ in͏͏ both͏͏ market͏͏ share͏͏ and͏͏ profitability.
Continue͏͏ Exploring:͏͏ Blinkit͏͏ best͏͏ positioned͏͏ to͏͏ benefit͏͏ from͏͏ quick͏͏ commerce͏͏ growth;͏͏ Zomato PT raised͏͏ to͏͏ INR͏͏ 353:͏͏ CLSA
As͏͏ of͏͏ Q1͏͏ FY25,͏͏ Blinkit͏͏ posted͏͏ an͏͏ annual͏͏ gross͏͏ merchandise͏͏ value͏͏ (GMV)͏͏ of͏͏ $2.4͏͏ billion,͏͏ reflecting͏͏ an͏͏ 84%͏͏ increase͏͏ over͏͏ Instamart’s͏͏ $1.3͏͏ billion.͏͏ This͏͏ growth͏͏ was͏͏ fueled͏͏ by͏͏ Blinkit’s͏͏ robust͏͏ performance͏͏ in͏͏ essential͏͏ metrics͏͏ such͏͏ as͏͏ dark͏͏ store͏͏ additions,͏͏ average͏͏ order͏͏ volume,͏͏ and͏͏ daily͏͏ orders͏͏ per͏͏ store.
In͏͏ the͏͏ past͏͏ two͏͏ years,͏͏ Blinkit͏͏ has͏͏ launched͏͏ 260͏͏ dark͏͏ stores,͏͏ while͏͏ Instamart͏͏ added͏͏ 121.͏͏ By͏͏ the͏͏ end͏͏ of͏͏ Q1͏͏ FY25,͏͏ Blinkit͏͏ operated͏͏ 639͏͏ dark͏͏ stores,͏͏ compared͏͏ to͏͏ Swiggy’s͏͏ 581.
During͏͏ the͏͏ quarter,͏͏ Blinkit͏͏ reported͏͏ a͏͏ gross͏͏ order͏͏ value͏͏ (GOV)͏͏ of͏͏ INR͏͏ 4,923͏͏ crore,͏͏ which͏͏ is͏͏ 1.8͏͏ times͏͏ greater͏͏ than͏͏ that͏͏ of͏͏ Swiggy’s͏͏ Instamart.͏͏ Additionally,͏͏ its͏͏ take͏͏ rates͏͏ exceeded͏͏ those͏͏ of͏͏ Instamart͏͏ by͏͏ 430͏͏ basis͏͏ points.
Zomato Holds͏͏ 58%͏͏ Market͏͏ Share:
In͏͏ a͏͏ recent͏͏ research͏͏ note,͏͏ Morgan͏͏ Stanley͏͏ highlighted͏͏ that͏͏ Zomato͏͏ holds͏͏ a͏͏ market͏͏ share͏͏ of͏͏ 58%͏͏ in͏͏ the͏͏ food͏͏ delivery͏͏ segment,͏͏ an͏͏ increase͏͏ from͏͏ 54%͏͏ in͏͏ FY22.͏͏ The͏͏ company͏͏ also͏͏ outperforms͏͏ Swiggy͏͏ in͏͏ contribution͏͏ margins͏͏ and͏͏ adjusted͏͏ EBITDA,͏͏ thanks͏͏ to͏͏ its͏͏ scalability.
Meanwhile,͏͏ Swiggy͏͏ Instamart͏͏ is͏͏ lagging͏͏ behind͏͏ Zomato’s͏͏ quick͏͏ commerce͏͏ division,͏͏ Blinkit,͏͏ with͏͏ disparities͏͏ in͏͏ average͏͏ order͏͏ volume͏͏ and͏͏ take͏͏ rate͏͏ contributing͏͏ to͏͏ the͏͏ margin͏͏ gap.͏͏ While͏͏ Swiggy͏͏ Instamart͏͏ recorded͏͏ an͏͏ adjusted͏͏ EBITDA͏͏ loss͏͏ of͏͏ -11.7%͏͏ in͏͏ Q1͏͏ FY25,͏͏ Blinkit͏͏ nearly͏͏ achieved͏͏ EBITDA͏͏ break-even͏͏ at͏͏ -0.1%,͏͏ according͏͏ to͏͏ the͏͏ brokerage.
