'Faster than Swiggy': Zomato stock surges as brokerage cheers growth numbers

Shares of food tech company Zomato Ltd surged to the day's high of ₹204.65 on the BSE today after brokerage major CLSA gave a positive rating on the stock. Shares opened a gap up at ₹202 on the BSE and hit the day's high at ₹204.65, 1.5% lower than ₹207.30 touched on May 13, 2024.

At the current share price, Zomato's m-cap stands at ₹1.77 lakh crore. Shares of Zomato have surged 62.24% in the year-to-date period, while the scrip has risen 61.56% in the past six months, and 9.99% in the past month. 

Brokerage major CLSA, in its June 24, 2024, client note gave a ‘BUY’ call on the stock, with a price target of ₹248, an upside potential of 28% from the current levels. 

CLSA said Zomato is growing faster than its rival company Swiggy, adding that Swiggy’s overall gross order value growth stands at 26% YoY against 31% for Zomato.

Global consumer internet and technology investor Prosus, in its annual report on Monday, cited growth in the business of Bengaluru-based Swiggy, in which it holds a 32.65% stake. Prosus said the 10-year-old startup saw a growth of 26% year-over-year in its gross order value (GOV). By the end of December 2023, Prosus says Swiggy's user base touched the milestone of 104 million, with a fleet of around 387,000 active delivery partners. 

"Swiggy’s revenue grew by 24%, excluding mergers and acquisitions and adjusted EBITDA improved to a loss of US$ 261 million. Swiggy’s core food-delivery business grew by double digits on healthy order growth and higher average order value,” Prosus said.

CLSA in its note said that compared to Swiggy’s overall revenue growth of 24% YoY, Zomato’s adjusted revenue growth stands at 35% YoY, it said. "However we note that these are not fully comparable as Swiggy’s revenue includes some B2B sales."

Additionally, the brokerage says Swiggy’s core food delivery gross order value grew by double digits in FY24 compared to a 19% YoY growth in Zomato’s food delivery GOV. "If we assume a 10%/20% GOV growth for Swiggy’s food delivery GOV, it would be 74%/80% of Zomato’s food delivery GOV for Jan-Dec 2023," says CLSA.

In the non-food delivery business, if the GOV growth is assumed at 10%, it translates to a 108% growth in GMV. On the other hand, if growth in the food delivery business was at 15%/20%, the non-food delivery business would have grown by 68%/29%, CLSA said.

In terms of the number of active delivery partners, too, Swiggy lagged behind Zomato at 3,87,000 vs 419,000 (Dec-23), the report said.

In dark stores, Swiggy Instamart has a total of 487 active ones compared to 526 for Blinkit.

Notably, Zomato reported a net profit of ₹175 crore for the quarter ended March 31, 2024, compared with ₹188-crore loss in the same quarter a year ago. Its revenue rose 73% year-on-year to ₹3,562 crore for the fourth quarter as against ₹2,056 crore in Q4 FY23.

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