After reviewing Zomato‘s Q4 results, brokerage firm Bernstein upheld its “OUTPERFORM” rating for the foodtech company’s stock and increased its price target (PT) from INR 200 to INR 230.
This marks a premium of over 18% from the stock’s previous closing price of INR 193.7 on the BSE as of Monday (May 13).
In a note, the brokerage firm highlighted Zomato as its “top pick” among Indian new-age tech companies, attributing this choice to the company’s improving profitability and the “impressive” growth of its quick commerce arm, Blinkit.
Continue Exploring: Zomato’s Q4 net profit surges 27% quarter-over-quarter to INR 175 Cr
“Zomato continues to strengthen our belief in achieving the breakeven milestone for its quick commerce business. Blinkit’s growth remains impressive, with a year-on-year increase of 97% and a quarter-on-quarter rise of 14%… The core food delivery business exhibited robust year-on-year growth of 28% in Gross Order Value (GOV), accompanied by profit expansion… We view Zomato as a fundamental internet investment. Consequently, we’ve raised our price target to INR 230,” stated Bernstein.
Additionally, the brokerage firm indicated that Blinkit is poised to maintain its aggressive store expansion strategy, with plans to add 100 stores in Q1 FY25, aiming to reach the milestone of 1,000 stores by the end of March 2025.
Regarding food delivery, Bernstein noted that the foodtech leader experienced robust growth in both average order value (AOV) and order volume in the quarter ending March 2024. They further highlighted that the contribution margin witnessed significant expansion, driven by increased AOV, advertising take rate, and platform fees.
Continue Exploring: Blinkit’s Q4 FY24 revenue hits INR 769 Crore; loss narrows to INR 37 Crore
The brokerage firm expressed its approval shortly after Zomato unveiled its financial results for Q4 FY24. Sustaining its profitable trend, the foodtech giant announced a consolidated profit after tax (PAT) of INR 175 Cr for the period, marking a 26% increase from INR 138 Cr in the previous quarter. This stands in stark contrast to the net loss of INR 187.6 Cr reported in Q4 FY23.
Meanwhile, Blinkit, the quick commerce vertical, achieved adjusted EBITDA positivity in March 2024, driven by robust growth in order volume and average order value (AOV) over the three-month period. Despite revenue increasing by 19% sequentially to INR 769 Cr in Q4 FY24, the platform’s EBITDA loss improved to INR 37 Cr, compared to INR 89 Cr in Q3 FY24.
The announcement comes as the foodtech major’s stock continues to witness upward movement on the bourses. With promising financial figures backing it, Zomato’s shares have surged over 210% in the last 12 months and 57% year-to-date (YTD).
In addition, Zomato revealed on Monday its intentions to introduce a new ESOP scheme, wherein it aims to allocate 18.26 Cr stocks to eligible employees. Based on the stock’s recent closing price, this ESOP plan would equate to shares valued at approximately INR 3,500 Cr.
Continue Exploring: Zomato seeks shareholder approval for 18.26 Cr employee stock options plan
Also on the same day, the company disclosed its intentions for its fintech arm, Zomato Payment, to voluntarily return its online payment aggregator license to the Reserve Bank of India (RBI).
Zomato’s shares concluded 3.82% lower at INR 193.70 on the BSE on May 13th.
Continue Exploring: ICICI Securities raises Zomato’s price target to INR 300, citing strong growth and profitability metrics