Shares of food delivery platform Zomato Ltd's market cap surpasses Rs 1 lakh crore, last seen on 19 Jan 2022, with a 102% surge this year. Zomato surged around 5 percent and hit nearly 22 month high of Rs 121.90 in opening trade on November 6 as the company's second straight quarter of profit in the July-September period impressed brokerages across the board and prompted some to raise their price targets for the stock.
At 09.28 am, shares of Zomato were trading nearly 2 percent higher at Rs 118.60 on the NSE. The stock hit a high of Rs 121.90 on BSE -- a level last seen on 22 January 2022. Shares of the company had also settled 8.3 percent higher on the NSE on November 3 after the company announced its Q2 results.
Zomato posted a net profit of Rs 36 crore, while revenue grew 71 percent on year to Rs 2,848 crore. The company had posted a net loss of Rs 302 crore and revenue of Rs 1,661 crore in the year-ago period. The growth comes at a time when the e-commerce sector battles inflation and muted demand.
Nuvama Institutional Equities, which raised its price target for the stock by over 27 percent to Rs 140, said Zomato’s revenue growth was much stronger than expected, as all businesses continued to grow at full throttle.
"Strong growth across business gives us confidence in Zomato’s ability to maintain its lead in food delivery as well as gain market share in quick commerce," the firm said in a note while retaining its "buy" call on the stock.
As it focuses on growth over profitability, Zomato expects sequential gross order value (GOV) growth in food delivery to be moderate around high single digit in the next quarter, which should translate to about a 25-30 percent on-year increase.
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HSBC, which also raised the price target for the stock to Rs 140 while maintaining a "buy", too, is positive on Zomato's guidance for the next quarter. The firm remains bullish on Zomato's long-term prospects as it sees continued traction for its quick commerce business.
Jefferies said Zomato's GOV growth acceleration addresses a key investor concern around monthly transacting users (MTU) and frequency. The brokerage has a "buy" rating on the stock with a price target of Rs 165.
With a dominant market share and strong growth in the food delivery business and Hyperpure, Zomato may report a strong 53 percent adjusted revenue compounded annual growth rate (CAGR) over FY23-25, Motilal Oswal Financial Services said.
"We now estimate Zomato to turn positive on reported EBITDA by 3QFY24 (earlier 4QFY24) and deliver 4.1 percent EBITDA margin in FY25," MOFSL said in a note. The brokerage has a "buy" recommendation on the stock with a price target of Rs 135.
Morgan Stanley said Zomato's solid performance in the September quarter demonstrates that its strategy is working well and is an example of its executive prowess. However, the brokerage also sees some upside risk to Zomato's FY24 revenue after a strong Q2. The firm has an "overweight" call on the stock with a price target of Rs 125.
Also read | Zomato-owned Blinkit turns contribution positive in Q2, adjusted EBITDA margin improves
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