Buy Eternal; target of Rs 260: Motilal Oswal

Motilal Oswal's research report on Eternal

Eternal reported 4QFY25 revenues of INR58b, up 8% QoQ, in line with our estimate. Growth was led by Blinkit (GOV up 20% QoQ/134% YoY). The food delivery business delivered 16% YoY growth in GOV with a steady increase in margins. Adj. EBITDA as a % of GOV margin was up 10bp QoQ at 4.4%. PAT came in at INR360m (est. INR1.8b), down 78% YoY, primarily attributed to increased investments in accelerated dark-store openings and customer acquisitions in the Quick Commerce (QC) business. For FY25, revenue/adj. EBITDA grew 67%/190% YoY vs. FY24.  For 1QFY26, we expect revenue to grow 63% and adj. EBITDA to decline 14% YoY. Our DCF-based valuation of INR260 implies a 12% upside from the current price. We reiterate our BUY rating on the stock, supported by Eternal’s market leadership in both QC and Food Delivery, and the longterm potential of Blinkit as a generational opportunity in retail, grocery, and e-commerce disruption.

Outlook

Eternal's food delivery business is stable, and Blinkit offers a generational opportunity to participate in the disruption of industries such as retail, grocery, and e-commerce. We value the business using a DCF methodology, assuming 12.5% cost of capital. We reiterate our BUY rating with a TP of INR260, implying 12% potential upside.