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Largecap stock to buy now for an upside of 20%; Are you holding it?

Published 08-10-2024, 02:04 pm
Updated 08-10-2024, 03:15 pm
© Reuters.  Largecap stock to buy now for an upside of 20%; Are you holding it?
ZOMT
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This prominent food delivery and restaurant discovery platform surged nearly 5 percent to Rs.278.15 per share after reputed brokerage firm HSBC set a target price indicating potential growth.

Share Price Movement

In Friday’s trading session, Zomato (NS:ZOMT) Limited‘s share price reached an intra-day high of Rs.278.15 per share, marking a 4.53 percent increase from its previous close of Rs.266.10 apiece. Over the past year, the stock has delivered returns exceeding 160 percent.

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Target Recommendation

Zomato Ltd. maintains its competitive edge in India’s food delivery and quick commerce markets, with HSBC Global reaffirming its ‘buy’ rating and raising its target price from Rs.260 to Rs.330 per share, indicating a potential upside of 19.9 percent.

The brokerage highlighted Zomato’s lead over Swiggy, boasting a 45 percent larger active user base and a Gross Order Value (GOV) 35 percent higher. Zomato’s GOV grew at a CAGR of 23 percent from fiscal 2022 to 2024, outpacing Swiggy’s 16 percent growth.

There is significant upside potential in profitability due to Zomato’s lower take rates compared to Swiggy. Additionally, Zomato’s loyalty program, Zomato GOLD, has positively impacted order frequency.

Quick Commerce upgrade

In the quick commerce sector, Zomato’s subsidiary, Blinkit, has surpassed Swiggy’s Instamart by adding more dark stores and maintaining higher order volumes. HSBC’s optimistic outlook is further supported by Zomato’s diversification into new ventures, including entertainment ticketing services, valued at around $1 billion.

Blinkit operates 639 dark stores, surpassing Instamart by 58 stores, and aims to expand to 1,000 stores by fiscal 2025, reinforcing its market leadership. HSBC anticipates that Blinkit will continue to lead with stronger take rates and contribution margins, while Instamart falls behind in both store expansion and order size.

Financial Performance

In its latest financial update, the company reported remarkable net sales of Rs.4,206 crore for Q1 FY25, reflecting a 74 percent increase from Rs.2,416 crore in Q1 FY24. Moreover, net profits skyrocketed 12,550 percent to Rs.253 crore in Q1 FY25, compared to just Rs.2 crore in Q1 FY24, highlighting significant growth during this period.

About the company

Zomato Ltd is an Indian multinational restaurant aggregator and food delivery service. It offers users the ability to discover restaurants, read reviews, and order food for delivery, operating in over 1,000 cities worldwide

Written by – Siddesh S Raskar

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