From ₹49 to ₹151: Zomato shares gain 200% in 11 months on turnaround in earnings

Online food delivery platform Zomato has had a stellar run on the stock exchanges in the last one year after a roller coaster journey since its market debut in July 2021, thanks to a revival in the financial performance, which led to optimism among its investors. The Deepinder Goyal-led food tech major is one of the preferred stocks in the listed internet space as analysts believe it is likely to benefit from robust industry tailwinds for the hyperlocal delivery businesses, while its diversified business model is another positive for the company.  

Shares of Zomato have risen 200% in the last 11 months, rebounding from its 52-week low of ₹49 on March 28, 2023, to hit a fresh 52-week high of ₹151.45 intraday today. The market capitalisation of the homegrown food delivery major surged by ₹85 lakh crore to ₹1.29 lakh crore during this period. At the day’s high level, Zomato shares have nearly doubled from its IPO issue price of ₹76, while it inched close to its all-time high of ₹169, hit on November 16, 2021.

On Friday, Zomato shares opened higher for the fourth straight session at ₹146.90 against the previous closing price of ₹144 on the BSE. During the session so far, the largecap stock gained as much as 5.2% to ₹151.45, with nearly 93 lakh shares changing hands over the counter, nearly double the two-week average of 44 lakh stocks.

In the last one year, Zomato shares have zoomed 172%, while it climbed 57% in six months. The counter has added 10% in a month and nearly 3% in a week.

Zomato shares got a boost after the company posted profit for the third consecutive quarter in the October-December period of FY24 despite muted demand in discretionary consumption. The company reported consolidated net profit of ₹138 crore in Q3 FY24 against a loss of ₹367 crore in the year-ago period, driven by topline growth, and a rise in gross order value (GOV) across its business segments – food-delivery, B2B arm Hyperpure and quick-commerce arm Blinkit.

The consolidated revenue from operations during the quarter rose 69% year-on-year (YoY) to ₹3,288 crore in Q3 FY24, while consolidated EBITDA for the quarter stood at ₹51 crore against an EBITDA loss of ₹366 crore in the year-ago period. The EBITDA margin for the quarter stood at 1.5%.

Post Q3, JM Financial maintained a ‘Buy’ rating on Zomato with a target price of ₹200, an upside potential of 25% from the current market price. “Zomato continues to be one of our preferred picks in the listed Internet space as we believe it is well positioned to benefit from robust industry tailwinds for the hyperlocal delivery businesses. Its balance sheet also remains strong with net cash of ₹12,000 crore as of Dec’23 versus ₹11,800 crore in Sep’23,” it says in a report released today.

The brokerage says that the management’s guidance was “robust” as they suggested 50%+ YoY growth in consolidated adjusted revenue in the near term (versus 40%+ guided in the medium term earlier), while also retaining its adjusted EBITDA break-even guidance for Blinkit by Q1 FY25.

“While Blinkit, once profitable, can command premium profit multiples to the food delivery business, as it is relatively more sticky and a play on retail commerce (bigger TAM and longer growth runway), for the time being we value it at 2x Mar'26 GOV. As dining-out and hyperpure businesses are loss-making, we value them at 3x/1x sales, respectively, basis their long-term steady-state EBITDA margin potential,” the report notes.

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