Zomato shares, that started trading on the Indian stock exchanges in July, have gained over 45% from its IPO issue price of ₹76 apiece with the stock currently trading at around ₹139 per share level. Brokerage firm Jefferies sees huge potential upside on the food-delivery platform’s stock with a one-year time frame.
“In our upside case, we expect a 42% CAGR in delivery GOV over FY20-26E to reach US$12bn by FY26E. We assume strong up-tick in new user acquisition/ order volume growth and AOVs also hold at a healthy level. Other segments also grow strongly as the platform scales up,” Jefferies said in a note on Zomato.
However, in the downside scenario, Covid-19 poses additional disruption in FY22, which is exacerbated by growing competition from Swiggy, direct ordering etc, it said.
GST Council has made food delivery platforms liable to pay GST from January 1, 2022. However, no new tax is introduced but this is just the transfer of GST payment responsibility from restaurants to the platforms. Hence, Jefferies said that there is no impact on customer bill value, although the change may raise some compliance burden on the platforms & restaurants.
Zomato expanded into the healthcare space in early 2021. “We were surprised with the move given we did not see a right to win for Zomato which has strong association with delivery. While healthcare is still a small market, there are options available in the online/offline space,” the note highlighted. Zomato’s stake acquisition in Grofers provides exposure to the grocery theme and Jefferies sees a possibility of further investments ahead.
Jefferies ‘Buy’ recommendation on Zomato comes with a base case target price of ₹175. However, it sees the stock upside scenario at ₹270 whereas downside scenario at ₹90 per share.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
Never miss a story! Stay connected and informed with Mint.
our App Now!!