 "Zomato | Photo: Bloomberg")
Macquarie on Zomato: Zomato shares tumbled 5.15 per cent to Rs 171.25 apiece on the BSE on Friday after global brokerage predicted a 47-per cent downside in the stock price.
While maintaining its 'Underperform' rating, Macquarie said it values Zomato share price at Rs 96, which is 46.7 per cent lower than the stock's current market price.
According to reports, Macquarie sees increased competitive pressure on Zomato with JioMart potentially planning to offer 30-minute grocery delivery in multiple cities, starting next month and expanding further.
According to reports, Reliance Industries is likely foraying into quick commerce next month as JioMart prepares to launch deliveries in under-30 minutes. JioMart will begin deliveries in 7-8 cities initially, and gradually scale up to cover over 1,000 cities, the report added. READ HERE
There has, however, been no official statement from Reliance Retail or the Reliance Group.
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"Multiple incumbent players have announced renewed ambitions in the quick commerce space. Despite the large potential total addressable market (TAM) of India retail, we continue to see downside risks to consensus earnings estimates due to rising competition," Macquarie said.
Macquarie's stand comes a month after Goldman Sachs analysts said Zomato-owned quick commerce platform Blinkit's implied market value is larger than that of its core food delivery business.
"Blinkit's implied valuation in our Zomato's sum of the parts (SOTP) is $13 billion now, versus $2 billion in March 2023, with per share implied value of Rs 119 higher than food delivery, at Rs 98, for the first time," the analysts said in a note in April.
In the March quarter, Blinkit's gross order value (GOV) grew 14 per cent quarter-on-quarter (Q-o-Q) and 97 per cent year-on-year (Y-o-Y). Margins for the platform, too, improved with contribution margin expanding 150bps Q-o-Q to 3.9 per cent, and Ebitda margins improving by 160bps to -0.9 per cent.
Notably, the management highlighted that Blinkit achieved Ebitda breakeven in March, in-line with the previous guidance of segment breakeven by Q1FY25.
The management plans to "double down" on quick commerce and plans to add 100 stores (526 as of end-March) in Q1FY25, and reach 1,000 stores by end-FY25. Despite rapid expansion for Blinkit, adjusted Ebitda margin is expected to "hover around zero" for next few quarters, with a 4-5 per cent medium-term target. The management also targets to increase quick-commerce penetration in top 8 cities (after Delhi NCR) to Delhi's levels which could lead to 4x increase in GOV in those cities.
"Overall, we raise our FY24E-FY30E adjusted Ebitda/net income estimates for Zomato by up to 9 per cent (FY25 2-3 per cent lower), with our 12-month target price moving to Rs 240 (vs Rs 170 earlier). We believe the market is still under-appreciating Zomato's growth and profit potential in the online grocery segment," Godman Sachs said.
Analysts at Nuvama Institutional Equities, too, value Blinkit more than Zomato with the food delivery business valuation at $10 billion and Blinkit at $13 billion. The upgrade, they said, was due to faster-than-expected growth in Blinkit and clear leadership in quick commerce.
"Announcement to increase dark stores count to 1,000 by the end of FY25 marks a significant reset in expectations and positioning within the quick commerce for Blinkit. While achieving this target shall not be straightforward, dark store additions or profitability, the robust track record of management instil confidence in their ability to execute this ambitious objective," they said in a post result report.
The brokerage, which has a 'Buy' rating with a target price of Rs 245., opines Blinkit's dominant position in quick commerce is poised to establish Zomato as the unrivalled leader in hyper-local delivery in India
At 2:13 PM, Zomato stock was down 3 per cent at Rs 175 per share as against a 0.48 per cent rise in the benchmark S&P BSE Sensex.
