Shares of Zomato Ltd hit a year-high on Monday after the online food delivery platform came out with strong Q2 results that beat Street’s expectations. Most analysts while reiterating their stance, hiked the target price too, as the company performed well on most metrics and outlook remains robust. Besides, buying by foreign portfolio investors also turned the sentiment positive for the caterer, said analysts.
After hitting a high of ₹123.90, the Zomato stock closed at ₹123.30, up 5.93 per cent over the previous day’s close on the BSE. The stock more than doubled year-to-date. At the start of the year, Zomato shares were ruling at ₹60. The stock closed with a market capitalisation of ₹1.06-lakh crore.
Prashanth Tapse, Senior VP (Research), Mehta Equities, said: “Zomato’s remarkable 6 per cent gain and its achievement of a market capitalisation exceeding ₹1-lakh crore are standout moments.” The company hit the capital market in 2021 at an issue price of ₹76. After hitting an all-time high of ₹158 in December 2021, the stock has been on a downward hill to hit an all-time low of in July 2022.
Impressive performance
Emkay Global Reserach said Zomato has delivered yet another impressive performance, with strong growth across segments. “Food Delivery growth was solid for the second consecutive quarter, aided by demand uptick, strong execution, and growing adoption of the Gold program, which led to higher order volumes,” it said while reiterating its Buy recommendation with a higher price target of ₹140.
Zomato on Friday reported a consolidated profit after tax of ₹36 crore for the second quarter ended September 2023 as against a loss of ₹251 crore reported during the corresponding quarter of the previous financial year. Revenues improved to ₹2,848 crore (₹1,661 crore).
“With the company expecting strong growth for both Blinkit and food delivery in 3QFY24, we expect Zomato to deliver a strong 65 per cent YoY growth in FY24,” said Motilal Oswal Financial. Zomato should deliver a revenue CAGR of 32/116 per cent in food delivery/quick commerce verticals over FY23-25, helping it grow its consolidated adj. revenue by 53 per cent, over the same period.
Blinkit delivers
Zomato’s sequential gross order value (GOV) expansion in food delivery as well as Blinkit businesses in Q2-FY24 surprised JM Financial positively. “Another positive surprise was the near-doubling of the company’s Gold membership program from 2 million to 3.8 million, in a matter of just one quarter, amidst muted growth trends in the underlying industry and intensified competitive intensity,” it added.
Zomato also reported FCF (free cash flow) for the first time. FCF in H1-FY24 was at ₹221 crore, led by better profitability. “We believe Zomato’s clout in the food business (duopoly nature) and scalability prospects in Blinkit may drive share price performance,” said Elara Securities.
Institutions’ favourite
The stock turned institutional investors favourite during the previous quarter. Foreign portfolio investors, mutual funds, insurance and alternate investment funds increased their holding in Zomato. FPIs stake increased to 38.33 per cent from 34.03 per cent in June quarter. MFs holding stood at 10.75 per cent (8.48 per cent), AIFs (0.93 per cent (0.75 per cent) and insurance companies 1.55 per cent (0.85 per cent).
However, retail investors stake reduced marginally to 5.80 per cent from 5.87 per cent and high net worth individuals to 1.45 per cent (1.53 per cent).