Can Zomato shares reclaim triple-digit mark?

Market


Zomato reported narrowing of its consolidated net loss to 250.8 crore for the second quarter ended September 2022, as compared to 434.9 crore loss in the year-ago period. Meanwhile, its revenue from operations increased to 1,661 crore during the July-September quarter, as against 1,024 crore in the corresponding period of the previous financial year. Following Zomato’s strong Q2 results, the company’s management presented a strong outlook.

“While guidance on food delivery break-even by Sep-23 stays, mgmt. intends to balance growth & profitability and will not compromise on the former. Food delivery adj. Ebitda margin guidance of 4-5% in the medium-term. Blinkit growth outlook also is positive and integration has been smooth. We incorporate Blinkit in our forecasts,” said global brokerage Jefferies.

The brokerage house has maintained its Buy rating with high-conviction on Zomato shares with a target price of 100 apiece, as it believes current valuations are undemanding in the context of profitable growth.

The company’s management commented that the moderation in food GOV growth (23% YoY & 3% QoQ) was partly due the strategic choice to trade low quality growth for better unit economics. However, 2Q was also soft on demand with lower app opens which show lower intent to spend. Inflation may have had an impact and monsoon period has a seasonality impact as well, it highlighted.

“Zomato in 2Q continued to impress on both quantitative as well as qualitative factors. We expect sequential growth trends to accelerate in 3QFY22 on account of festive season and global sporting events,” said analysts at JMFinancial.

The brokerage has retained its optimism on strong value proposition for Zomato from its nonfood delivery segments such as Quick Commerce and Hyperpure. It has also maintained its buy rating on the stock with a target price of 130 per share.

Shares of Zomato, that made market debut in July last year, are down over 44% since listing. The stock, which hit a high of 169 in November 2021, is currently hovering around 70 apiece.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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