Zomato shares slide 7% as weak Q3 profit and intense competition hit quick commerce margins

Zomato’s shares tumbled 7% in early trade to ₹223, extending losses from the previous session when the stock dropped over 7% after the company reported disappointing Q3 FY25 results. Rising competition in the quick commerce segment and weak profitability dragged investor sentiment.

Key Financial Highlights:

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  • Revenue from Operations: ₹5,405 crore (+64.4% YoY)
  • Total Income: ₹5,657 crore (+61.3% YoY)
  • Net Profit: ₹59 crore (-57.2% YoY, missed estimates)
  • Total Expenses: ₹5,533 crore (+63.5% YoY)
  • Consolidated Adjusted EBITDA: ₹285 crore (+128% YoY), but impacted by Blinkit losses.

Competition and Margin Pressure:

Zomato’s Q3 results revealed challenges in its quick commerce segment, which saw heightened competition leading to increased investments and a temporary pause in margin expansion. Albinder Dhindsa, CEO of Blinkit, acknowledged the competitive pressures but remained optimistic about the future.

  • Gross Order Value (GOV):
    • Food delivery: +17% YoY, +2% QoQ
    • Quick commerce: +120% YoY, +27% QoQ
    • Going out: +191% YoY, +35% QoQ
    • Hyperpure revenue: +95% YoY, +13% QoQ

Dhindsa stated, “Heightened competition has led to a pause in margin expansion in the business, which is expected and should be temporary.” The company aims to achieve its target of 2,000 Blinkit stores by December 2025, a year earlier than initially planned.

Brokerages on Zomato:

  • UBS: Retains ‘Buy’ with a ₹320 target; highlights margin expansion despite slower food delivery growth.
  • Macquarie: Retains ‘Underperform’ with a ₹130 target; flags competitive intensity and prolonged Blinkit losses.
  • Nomura: Maintains ‘Buy’ with a ₹290 target; sees strong positioning in Q-commerce.
  • Jefferies: Lowers target to ₹255; retains ‘Hold,’ citing mixed results.
  • BOFA: Reiterates ‘Buy’ with a ₹375 target; optimistic about long-term growth.

Analyst Insights:

The company reported mixed performance across segments, with food delivery showing slower growth but improving margins. However, the quick commerce business weighed heavily on profitability, contributing a loss of ₹103 crore during the quarter.

Shareholder Letter Highlights:

  • Despite the competition, Zomato reported stable customer retention in its Blinkit segment.
  • Top-performing Blinkit stores demonstrated robust contribution margins, reinforcing long-term growth potential.

Disclaimer: This information is for informational purposes only and should not be considered financial advice. Always consult your financial advisor before making investment decisions.