Zomato Achieves 22-Month High with Impressive Q2 Profit, Market Value Crosses Rs 1 Lakh Crore

In a remarkable turn of events, Zomato Ltd, the food delivery platform, has seen its market capitalization exceed Rs 1 lakh crore, a level last witnessed on January 19, 2022. This surge in market value comes as Zomato’s shares have risen by an impressive 102% this year. On November 6, the stock experienced a significant upswing, surging by around 5% to reach a nearly 22-month high of Rs 121.90. The driving force behind this surge is Zomato’s consecutive second quarter of profit in the July-September period, which has left brokerages impressed and prompted some to raise their price targets for the stock.

As of 9:28 AM, Zomato’s shares were trading nearly 2% higher at Rs 118.60 on the NSE. On the BSE, the stock reached a high of Rs 121.90, a level last observed on January 22, 2022. Zomato had previously witnessed an 8.3% increase in its NSE stock price on November 3, following the announcement of its Q2 results.

Zomato reported a net profit of Rs 36 crore, coupled with a 71% year-on-year growth in revenue, which reached Rs 2,848 crore. This is in stark contrast to the year-ago period when the company had posted a net loss of Rs 302 crore and revenue of Rs 1,661 crore. Zomato’s growth has come at a time when the e-commerce sector is grappling with inflation and muted demand.

Nuvama Institutional Equities, which increased its price target for the stock by over 27% to Rs 140, highlighted that Zomato’s revenue growth surpassed expectations, with all its businesses continuing to thrive.

“Strong growth across business gives us confidence in Zomato’s ability to maintain its lead in food delivery as well as gain market share in quick commerce,” the firm noted while maintaining its “buy” recommendation for the stock.

Zomato, which prioritizes growth over profitability, anticipates moderate sequential gross order value (GOV) growth in food delivery, estimated to be in the high single digits in the next quarter, resulting in a 25-30% year-on-year increase.

HSBC, while maintaining a “buy” rating and raising the price target to Rs 140, is positive about Zomato’s guidance for the next quarter. The firm continues to be bullish on Zomato’s long-term prospects and foresees sustained traction for its quick commerce business.

Jefferies commended Zomato’s GOV growth acceleration, addressing a key investor concern related to monthly transacting users (MTU) and frequency. The brokerage maintains a “buy” rating on the stock with a price target of Rs 165.

With its dominant market share and robust growth in the food delivery and Hyperpure segments, Zomato is poised to report a robust 53% adjusted revenue compounded annual growth rate (CAGR) from FY23 to FY25, according to Motilal Oswal Financial Services.

“We now estimate Zomato to turn positive on reported EBITDA by 3QFY24 (earlier 4QFY24) and deliver 4.1 percent EBITDA margin in FY25,” MOFSL stated in a note. The brokerage recommends a “buy” and sets a price target of Rs 135 for the stock.

Morgan Stanley recognizes Zomato’s solid performance in the September quarter as evidence that its strategy is effectively executed and underscores its executive prowess. However, the brokerage also sees upside risk to Zomato’s FY24 revenue after a strong Q2. Morgan Stanley maintains an “overweight” rating on the stock with a price target of Rs 125.