As Zomato turns profitable, brokerages rush to raise their target prices

Shares of Zomato Ltd saw a wave of increase in target price by several brokerages after the firm turned profitable for the first time. Meanwhile, many of the brokerages have maintained their ratings on the stock.

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26 Aug, 2025 12:21

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Shares of Zomato Ltd saw a wave of hikes in the target price by several brokerages after the company turned profitable for the first time, though many brokerages retained their ratings on the stock.

Motilal Oswal Securities expects the stock target at Rs 110 a share, up 28 percent from current market price, JM Financial expects stock to jump 37 percent in the next 12 months to Rs 115 a share, Citi raised its target price to Rs 115 from Rs 84 earlier, and Morgan Stanely increased its target price to Rs 115 from Rs 85 a share.

Goldman Sachs expects the target price at Rs 100 from Rs 82, while Jefferies India sees its target price at Rs 130 from Rs 100. Kotak expects the stock price to hit Rs 105 in the next one year from its earlier target of Rs 95, while HSBC increased the target price by 20 percent to Rs 102.

Zomato on August 3 posted a net profit of Rs 2 crore in the first quarter of the current financial year and reported revenues of Rs 2,416 crore, up 70.9 over the last year, as demand growth recovered on cooling inflation and strength of the food delivery platform’s loyalty programme.

Brokerage firm JM Financial's use of the term 'stellar' to describe Zomato's earnings falls short of capturing the true magnitude of the achievement. With their prior confidence that the Street estimates were too conservative, the actual extent to which Zomato's earnings surpassed expectations was truly remarkable and went beyond what anyone could have anticipated. It has maintained Zomato as the top pick within its listed internet coverage.

"Baking in the results and the guidance, even with a decent margin of safety, suggests Zomato is a rare play on both growth as well as profitability. While the stock has moved up 35 percent since March-quarter results, we expect the momentum to sustain, as at CMP, the market is largely capturing value attributable to only its FD business, whereas significant value unlocking is waiting to happen in Blinkit," JM Financial said in a note.

According to Jefferies, Zomato's journey since its IPO has been full of remarkable ups and downs. However, the company has achieved a significant milestone by becoming adjusted-EBITDA and consolidated PAT positive much earlier than expected, surpassing their own guidance. This success puts to rest any concerns about Zomato's capability to generate 'respectable' profits.

Additionally, the impressive results enhance the credibility of the management team and its execution capabilities, which bode well for Blinkit, a division that many investors previously undervalued or even viewed negatively. As a result of these positive developments, Jefferies has significantly raised their EBITDA projections.

Zomato’s food delivery gross order value (GOV) expanded 11.4 percent to Rs 7,318 crore,  average monthly transacting users jumped 5.4 percent to 17.5 million. Blinkit saw its GOV grow by about 5 percent sequentially to Rs 2,140 crore,  at the same time its average order value (AOV), increased to Rs 582,  a 11.5 percent increase on-quarter.

"We remain positive and expect long-duration 15 percent GOV (Gross Order Value) growth in food delivery, though we see significant upside from the quick commerce business (Blinkit), which could be as big as the FD business ahead with commensurate unit economics," HSBC said in its latest note.

Brokerages Dolat and Macquarie Research have cut their target price. Dolat has cut target price at Rs 65, down 25 percent, while Macquarie maintained its under performance rating and kept target price to Rs 55 a share from current market price. Nomura expects a target price of Rs 60 a share.

Zomato provided an optimistic outlook by projecting a remarkable growth of adjusted revenue at a rate of +40 percent for the next couple of years leading to continued improvement of contribution margin (CM) and adjusted EBITDA margin.

Nomura forecasts a CAGR of around 20 percent for Zomato's core food delivery business during the FY24-25 period, accompanied by a contribution margin (CM) ranging from 7 percent to 7.5 percent. Despite acknowledging that Zomato is on track to achieve its EBITDA margin target of 4-5 percent (as a percentage of Gross Order Value) sooner than expected, Nomura remains sceptical about the company's ability to attain a double-digit CM amid sustained high growth in the long run.

"Transacting user growth momentum in both food delivery (+0.9mn QoQ in a seasonally strong quarter) and quick commerce (flat) was below estimates. We note lack of clarity from the management on the bottom-up growth drivers for the core food delivery business. Further, if a bulk of the growth guidance is driven by Hyperpure, Going Out, or Blinkit, this would unlikely be value-accretive," said Macquarie in its latest report.