Bernstein has reiterated its ‘Outperform’ rating on Zomato, setting a target price of ₹310, which implies a significant upside potential of 34% from the current market price (CMP) of ₹230.70. The brokerage remains optimistic despite heightened competition, citing Zomato’s aggressive growth plans and improving profitability in food delivery.
Key Highlights:
- Quick Commerce (Blinkit):
- Management revised its store expansion target to 2,000 dark stores by December 2025, advancing the timeline from December 2026.
- Quick commerce is projected to achieve 100%+ YoY growth in FY25 and FY26, highlighting its potential as a key driver of future growth.
- Aggressive expansion led to margin pressures (-1.3% Adj. EBITDA), reflecting the current trade-off between growth and profitability.
- Food Delivery Segment:
- Food delivery margins exceeded expectations, with management targeting 5% Adj. EBITDA margins, reminiscent of pre-COVID competition levels.
- The segment’s robust performance underscores its potential to stabilize and deliver consistent profitability.
- Outlook on Competition:
- While Bernstein acknowledges concerns about rising competition in quick commerce, it remains confident in Zomato’s ability to leverage its large Total Addressable Market (TAM) and capitalize on market consolidation.
- The brokerage views any near-term correction due to competition concerns as a buying opportunity.
Bernstein’s Take:
Bernstein believes Zomato’s dual focus on scaling quick commerce and maintaining profitability in food delivery positions it well for long-term growth. The combination of an expanding TAM and potential market consolidation supports its optimistic outlook.
Conclusion:
With a CMP of ₹230.70 and a target price of ₹310, Zomato’s stock offers a 34% upside. Bernstein recommends accumulating the stock on dips, emphasizing the company’s strong growth trajectory and market leadership.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investors should consult their financial advisor before making any investment decisions.