Zomato zooms over 11% as analysts deliver quick upgrades

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Shares of Zomato Ltd jumped nearly 11 per cent to ₹95.43 on the BSE, after the company reported its first-ever consolidated profit that was welcomed by analysts with upgrade in target price.

The company on Thursday said it posted a profit after tax of ₹2 crore in the April-June quarter of 2023-24. The company had posted a net loss of ₹186 crore in the same quarter last fiscal.

Hits 52-week high

Earlier in the day, the stock surged 14.10 per cent on the BSE to ₹98.39, which is also its 52-week high. On the NSE, it advanced 10.20 per cent to end at ₹95.40, after rallying 13.69 per cent to its 52-week peak of ₹98.40.

In traded volume terms, 1.41 crore shares of the company were traded on the BSE and over 40.57 crore shares on the NSE. Of the 40.57 crore shares, nearly 11.57 crore shares were up for delivery.

Brokerages bullish

Following the turnaround in fortunes, both domestic and foreign brokerages have increased the price targets and upgraded the price targets.

Motilal Oswal Financial said it remains positive on the long-term growth opportunity for Zomato and do not expect competition to intensify further despite the entry of ONDC in the space. “We see the strong all-round performance from Zomato as an indicator of an accommodative competitive environment in both food delivery and quick commerce verticals.”

According to Emkay Global — which retained its Buy rating on Zomato with increased price target of ₹110 (₹90 earlier) — said Zomato delivered a stellar operating performance, well ahead of expectations; it also posted profit for the first time. “After muted growth in the last couple of quarters, food delivery GOV jumped sharply, by 11.4 per cent QoQ, led by demand recovery, growing adoption of Gold program that drove higher frequency of ordering, seasonality, and strong execution.”

‘Top pick’

According to JM Financial, “While the stock has moved up about 35 per cent since Mar-Quarters results, we expect the momentum to sustain, as at CMP, the market is largely capturing value attributable to only its FD (food delivery) business, whereas significant value unlocking is waiting to happen in Blinkit. We reiterate Zomato as the top pick within our listed Internet coverage with a revised TP of ₹115 (vs. ₹105 earlier).”

However, Nomura maintained its Reduce rating on Zomato with a target price of ₹60 (earlier ₹45). “We factor in stronger growth and margin estimates for the core Food Delivery and Q-commerce businesses over FY24 and FY25. We continue to believe that sustaining high GOV growth and strong CM improvement of the core FD business for an extended period will remain challenging.”