Jefferies has maintained a ‘Hold’ rating on Zomato, revising its target price downward to ₹255 from ₹275, reflecting a cautious stance amid rising competition and mixed performance. The revised target implies a modest upside of 10.5% from the current market price (CMP) of ₹230.70.
Key Highlights:
- Food Delivery Segment:
- As anticipated, food delivery saw modest growth in Q3FY25.
- The segment surprised with better-than-expected margin improvements, signaling operational efficiencies.
- Quick Commerce (Blinkit):
- Quick commerce reported strong growth; however, it slipped into losses due to growth-driven investments and increased competition.
- Management aims to double Blinkit’s store count to 2,000 by December 2025, advancing its previous timeline by a year.
- Competition Dynamics:
- While Blinkit has demonstrated a strong track record in execution, Jefferies warns that its aggressive expansion strategy could prompt competitors to intensify their efforts.
- The entry of new players is likely to further elevate competitive pressures in the quick commerce space.
Jefferies’ Perspective:
Jefferies acknowledges Zomato’s execution strengths but remains cautious about the challenges posed by heightened competition and the financial strain of aggressive expansion. The revised target price reflects these concerns, despite Zomato’s progress in profitability and growth strategies.
Conclusion:
At a CMP of ₹230.70, Zomato’s stock offers limited upside based on Jefferies’ target of ₹255. While the company is well-positioned in food delivery and quick commerce, the evolving competitive landscape poses risks to sustained profitability and growth.
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.