Zomato stock rises 14%, approaching the Rs 100 milestone. Share price targets point to additional gains.
On the BSE, Zomato shares increased 14.11% to a one-year high of Rs 98.39. Zomato previously announced that its meal delivery service had made a profit after tax (PAT) of Rs 2 crore for the quarter.
In response to a solid set of June quarter results, Zomato's shares increased by almost 14% in Friday's trading to reach a new 52-week high. Analyst price targets for the stock point to additional gains. The stock has a target price of Rs 130 set by Jefferies, Rs 115 by JM Financial, Rs 110 by Motilal Oswal Securities, and Rs 130 by Nuvama Institutional Equities.
HIGHLIGHTS
The stock has a target price of Rs 130 set by Jefferies, while JM Financial pegs it at Rs 115.
The stock is valued at Rs 110 by Nuvama and Motilal Oswal Securities.
The number of monthly active users on Zomato rose by 5.4% QoQ to 1.75 crore.
When compared to the June quarter of the previous year, when Zomato's food delivery business posted a net loss of Rs 186 crore, the PAT for the period was Rs 2 crore.
While Zomato shares have increased by 35% since the March quarter results, according to JM Financial, the momentum is expected to continue because the market is mostly capturing value related to the food delivery industry, but Blinkit is still waiting to unlock a considerable amount of value.
On the BSE, the stock increased 14.11% to a one-year high of Rs 98.39.
After remaining unchanged for the previous two quarters, Zomato's meal delivery GOV increased 11% sequentially. In both FY24 and FY25, the management has forecasted adjusted sales growth of at least 40%. Additionally, the business plans to achieve Ebitda profitability in the upcoming quarters. Additionally, Zomato stated that it aims to achieve adjusted EBITDA profitability across all three operations in FY25.
Suzlon Energy, Zomato, SBI, IRFC, Adani Power, Reliance Power, and more will be hot stocks on August 4, 2023.
Zomato is expected to start reporting positive Ebitda by the March quarter, according to Motilal Oswal Securities, and it will have a 5% Ebitda margin in FY25. It values the company using the DCF approach, assuming a terminal growth rate of 4% and a cost of capital of 12.5%.
It stated, "We maintain our Buy rating with a target of Rs 110, implying a potential upside of 28%." The stock is valued at Rs 130 by Jefferies.
According to Nomura India, seasonal reasons like the IPL cricket event and the summer break for schools helped Zomato flourish. Due in part to the promotion of Zomato Gold, monthly transacting users (MTUs) climbed 5.4% QoQ to 1.75 crore users, the company reported.
"We think that over FY24F and FY25, the core Food Delivery and Q-commerce businesses would have better growth and profits. Our FD long-term adjusted Ebitda margin expectations, at 5.1% of GOV, are, however, largely unchanged. Our target price based on DCF increases from Rs. 45 to Rs. We still think it will be difficult to maintain robust GOV growth and the core FD business for an extended period of time," Nomura stated.
"Due to growth uncertainties, management has refrained from providing any growth guidance for the past few quarters. Strong GOV/revenue growth in Q1FY24 and forecasted adjusted revenue growth of more than 40% YoY for the following two years underline management's optimism and offer much-needed visibility. The focus will shift to FCF creation once the books are first profitable, according to Nuvama, who suggested a target price of Rs 110 for the shares.
