Zomato slips up to 5% post Macquarie's 'underperform' rating

Shares of food-tech platform Zomato Ltd dipped 5% today after brokerage major Macquarie's note projected a major fall in its share price in the next one year. Macquarie has maintained an 'underperform' rating on the Zomato stock, saying stiff competition from rivals including Mukesh Ambani-led JioMart, which will soon launch its delivery services. Its target price after the latest note on the stock remains ₹96.

Shares of Zomato opened a gap down ₹178.95 on the BSE and fell to an intra-day low of ₹171.45, down 4.7% from yesterday's closing price and down 17.3% from a 52-week high of ₹207.30 touched on May 13, 2024.

Another major analyst Goldman Sachs' recent view is contrary to that of Macquarie's. Goldman Sachs, in its April 25 note, had set a price target of ₹240 on the scrip, with a 29.9% potential upside.

"Zomato has been surprising positively on both profitability and growth (our FY25 quick commerce GOV estimate for Blinkit is tracking c.50% higher than our estimate one year ago), and we expect this trend to continue, supported by our new analysis on potential TAM, economics and industry structure for quick commerce," the Goldman report said, reiterating its 'BUY' rating on the stock.

The brokerage said Zomato's quick commerce implied value is now larger than food delivery’s. "Overall, we raise our FY24E-FY30E adjusted EBITDA/net income estimates for Zomato by up to 9% (FY25 2-3% lower), with our 12m target price moving to ₹240 (vs. ₹170 earlier)."

The brokerage said it saw catalysts for Zomato as continued strong growth in quick commerce, with near-term EBITDA breakeven; and further improvement in food delivery economics on the back of a benign competitive environment.

The food-tech platform's m-cap at the current share price of ₹174.30 on the BSE stands at ₹1.53 lakh crore. The Zomato share has risen 153.44% in the past year, with a 40.08% surge recorded in the year-to-date period and a 47.03% upside in the past six months. In the past week and one-month basis, the scrip has seen a fall of 9.76% and 3.53%, respectively.

The food delivery company's Q4 net profit stood at ₹175 crore compared with ₹188-crore loss in the same quarter a year ago. Revenue from operations rose 73% year-on-year to ₹3,562 crore for the fourth quarter as against ₹2,056 crore in Q4 FY23.

On a sequential basis, profit rose 27% from ₹138 crore posted in the December quarter while revenue increased 8.3%. For the full financial year 2023-24, Zomato logged a profit of ₹351 crore from a loss of ₹971 crore in FY23.

The top-line growth was driven by robust performance by food delivery service and quick commerce platform Blinkit. Zomato's food delivery business reported revenues of ₹1,739 crore in Q4 FY24, up from ₹1,172 crore in the year-ago period. The quick commerce business revenue stood at ₹769 crore during the quarter compared with ₹363 crore posted in Q4 FY23.

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