Large cap stock jumps nearly 14%; Brokerages see further upside of up to 35% 

Shares of a food aggregator soared 13.7 percent to reach a fresh 52-week high of ₹ 98.40 apiece on the National Stock Exchange (NSE) after the company turned profitable. At 02:50 PM, its shares were trading at ₹ 95.90, up 10.80 percent.

Zomato (NS: ZOMT ) posted a profit after tax (PAT) at ₹ 2 crore for the first quarter of the financial year 2023-24, against a net loss of ₹ 186 crore in the June quarter of the previous year.

Brokerage firm JM Financial (NS: JMSH ) believes that the momentum will sustain even though Zomato gained 35 per cent since the March quarter results. The stock is expected to capture value attributable to the food delivery business, whereas a significant value unlocking is waiting to happen in Blinkit.

Zomato’s food delivery gross order value (GOV) jumped 11 per cent sequentially, after being flat over the last two quarters. The management has guided for a 40 per cent-plus adjusted revenue growth each in FY24 and FY25. Moreover, the company is targeting EBITDA profitability in the coming quarters. In addition, Zomato said that it is targeting to turn adjusted EBITDA-profitable in all three businesses during FY25.

Motilal Oswal (NS: MOFS ) Securities estimates that Zomato will turn positive on reported EBITDA by the March quarter. It sees the company delivering a 5 per cent EBITDA margin in FY25. The brokerage has maintained a buy rating on the stock with a target price of ₹ 110.00, implying an upside of 14.70 percent as compared to its share price of ₹ 95.90.

Meanwhile, Jefferies finds the stock worth ₹ 130.00. This price target translates to an upside of 35.56 percent as compared to its share price. It said that Zomato’s growth was aided by seasonal factors like the summer holiday season for schools and the IPL cricket tournament. Monthly transacting users (MTUs) increased 5.4 per cent QoQ to 1.75 crore users led by the marketing push of Zomato Gold .

Zomato is one of the leading online food service platforms in terms of the value of food sold. Its offerings include food delivery, dining-out services, Loyalty programs, and others.

With a market capitalization of ₹ 72916 crores, Zomato is a large-cap company. It has a negative return on equity of 5.40 percent and an ideal debt-to-equity ratio of 0.03. Foreign institutions hold a 54.43 percent stake in it, followed by retail investors with 36.37 percent, mutual funds with 8.30 percent and other domestic institutions with 0.90 percent.

Written by Simran Bafna

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