Following robust Q3 FY24 earnings, shares of foodtech major Zomato surged as much as 6.2% during intraday trading on Monday (February 12), touching a fresh 52-week high at INR 158.7 on the BSE.
Last week, the company announced its third consecutive profitable quarter. Its consolidated profit after tax (PAT) nearly quadrupled to INR 138 Cr, primarily driven by the robust growth of its quick commerce business, Blinkit.
Continue Exploring: Zomato reports third consecutive profitable quarter with INR 138 Cr PAT in Q3 FY24
Although the gross order value (GOV) of its food delivery business saw a modest 6.3% sequential growth to INR 8,486 Cr in Q3, Blinkit experienced a substantial 28% quarter-on-quarter (QoQ) increase in GOV to INR 3,542 Cr.
Fueled by the company’s Q3 earnings, its shares gained almost 6.3% in the two previous trading sessions.
Jefferies, Nuvama, HSBC, and Kotak, among several other brokerages, have raised their price targets (PTs) on Zomato in light of the Q3 results.
HSBC raised its price target (PT) on the stock to INR 163 from the previous INR 150, suggesting a 9% upside from the stock’s closing price on Friday.
Continue Exploring: Zomato’s strong Q3 performance spurs brokerage firms to boost price targets; Blinkit expansion drives optimism
“In the medium term, we expect a further increase in take-rates and dilution in Gold proposition to drive the current EBITDA margins of 3% to the 4-5% range; this is likely to be a sustainable long-term profitability range for the business,” the brokerage said.
Regarding Blinkit, HSBC anticipates that growth will persist, particularly in the top 10 cities in the medium term. This projection is based on the enhancement of quick commerce penetration and the observed market share transition from mom-and-pop stores to quick commerce.
“Currently, Blinkit is mostly attracting customers’ sales promotion budgets and we see addressable spend growing materially if the company is able to target these customers’ corporate level marketing spend,” it added.
Conversely, Jefferies elevated its price target (PT) on the stock to INR 205 from the previous INR 190, whereas Kotak Institutional Equities raised its fair value to INR 190 from the earlier INR 160.
“Zomato’s medium-term revenue guidance of 40% and food delivery revenue growth guidance of 20% implies Blinkit can grow at a rapid 60-70% YoY growth rate in the next 2-3 years,” said Kotak.
Out of the 27 brokerages analyzing the stock, 24 have assigned a ‘buy’ or higher rating to Zomato.
The company’s shares rallied today amidst reports of a Delhi court summoning it in a civil suit. The suit seeks a restraining order against the company for its alleged involvement in the “false and fraudulent” practice of delivering fresh food from iconic restaurants under its sub-category, ‘Dilli ke Legends’.
Continue Exploring: Delhi court summons Zomato over alleged fraudulent practices in food delivery operations
Following a remarkable 100% surge last year, Zomato shares have already recorded a 25% increase year to date in 2024. As of 2:40 PM IST on Monday, the shares were trading 3.6% higher at INR 154.9 on the BSE.