The Indian markets started in the green on Tuesday. The BSE Sensex as well as the NSE Nifty 50 started marginally higher than the previous close, tracking mixed global cues.
Notably, the shares of food delivery platform Zomato Limited surged 18.49% to reach an intraday high of ₹ 67.60. The shares saw their biggest intraday rise since their listing and hit a market cap of ₹ 50,000 crores after a long time. This happened after the company announced its earnings for the March quarter.
The food aggregator’s revenue from operations almost doubled to ₹ 1,212 crores in Q4FY22, as compared to ₹ 692 crores in Q4FY21. This implies a year-on-year growth of 75%. On a yearly basis, its revenues increased from ₹ 1993.8 crores to ₹ 4192.4 crores, up 110.27%. Further, it said that it launched its services in more than 300 new cities, taking its presence to over one thousand towns and cities across India.
Its net loss widened to ₹ 359 crores for the quarter ended March 2022, impacted by higher expenses. Its loss has nearly tripled as compared to a loss of ₹ 134 crores recorded in the corresponding quarter of the previous year.
“Reduction in losses will be driven by improvement in a contribution margin of the food delivery business and also operating leverage playing out as our revenue is growing faster than our fixed costs,” the company said.
It added that it is experiencing a shortage in the availability of delivery partners in the current quarter in a few large cities since the last week of April. This might be short-term in nature since the post covid economic recovery has brought back jobs in cities, and they lost some delivery partners to such jobs.
Global brokerages are positive on the counter. They believe that the downside risk for investors is limited and that the worst is over for the company. Here are a few targets given by them:
JP Morgan
The brokerage has suggested a price target of ₹130 on the shares. The shares are currently trading at ₹ 64.00 apiece. Hence this translates to an upside of 103.13% and implies that Zomato could potentially give multibagger returns.
Citi
It has a target of ₹ 80 on the stock. This suggests an upside of 25% as compared to the current market price.
Morgan Stanley
The brokerage said that the company is moving in the right direction, but needs consistent execution to meet the high expectations. It has maintained an ‘overweight’ rating on the shares with a target of ₹135 apiece.
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