The shares of one of the leading online food delivery platform providers gained positive traction this week after several brokerages reiterated their bullish view on the company, followed by UBS’s target with a 28 percent upside.
On Friday, Zomato Ltd shares were trading at Rs 116.90, down 1.43 percent from the previous close on the National Stock Exchange. The company has a market capitalization of Rs 1,01,743 crore.
Since the end of the World Cup cricket match, the Zomato stock has fallen nearly 7 percent from Rs 125 per share. However, the stock remained steady though Alipay Singapore Holding Pte Ltd recently sold a 3.44 percent stake in Zomato via open market transactions at an average price of Rs 112.70 per share.
According to Citi, The new GST would add Rs 5 per order to non-Zomato Gold orders and may further support the adoption of Gold program loyalty, the foreign brokerage said.
Kotak Institutional Equities reported that Zomato’s introduction of Zomato Gold was with the intent of retaining and gaining market share in the food delivery business and the loyalty program has aided its gross merchandise value (GMV) growth.
According to brokerage Kotak Institutional Equities, Zomato had a $1.7 billion food delivery GMV in H1CY23, up 13% year on year. This implies a GMV share of 54:46 in Zomato vs Swiggy.
Zomato’s revenues increased by 71 percent year on year from Rs 1,661 crore in Q2FY23 to Rs 2,848 crore in Q2FY24, while net profit increased, from a loss of Rs 250 crore to a profit of Rs 36 crore.
According to JM Financial, despite tough competition from Swiggy and Zomato in the Indian market, Zomato has maintained a leading position with a 54% market share.
UBS has revised the buy target on Zomato to Rs 150 per share from Rs 125 per share with an upside of 28 percent based on Friday’s trading price of Rs 116.90.
Based on an optimistic outlook on the company, the brokerage cited a near 500 basis points improvement in the company’s food delivery margins and an 860 basis points improvement in overall margins between FY23 to FY26.
However, Swiggy’s significant losses have caused brokerages to regard Zomato as superior in terms of business performance when compared to Swiggy.
Zomato shares have delivered strong returns over a period of year-to-date basis with 95 percent and returned 74 percent in the last six months.
Zomato Limited is one of the leading online Food Service platforms in terms of the value of food sold. Its offerings include food delivery, dining-out services, Loyalty programs, and others. The company has a footprint across 23 countries with an average monthly food order of 10.7 million customers.
Written by Omkar Chitnis
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