Zomato rallies 5%, hits 2-year high on healthy December quarter results

Shares of Zomato hit a two-year high of Rs 151.45 as they rallied 5 per cent on the BSE in Friday's intraday trade, after the food aggregator platform company reported its third consecutive quarter of consolidated net profit at Rs 138 crore in the December quarter (Q3FY24), up from Rs 36 crore a quarter ago. The company had reported a loss of Rs 347 crore during the corresponding period last year.

In the past two months, the stock has surged 28 per cent. With today's rally, it is trading at its highest level since January 2022. It had hit a record high of Rs 169 on November 16, 2021. At 09:40 am, Zomato was trading 3 per cent higher at Rs 148.55 as compared to 0.13 per cent rise in the S&P BSE Sensex.

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In Q3FY24, Zomato's revenue from operations rose 69 per cent year-on-year (Y-o-Y) to Rs 3,288 crore, up from Rs 1,948 crore a year ago. It had reported revenue of Rs 2,848 crore in the previous quarter.

Further, Zomato's adjusted earnings before interest, tax, depreciation, and amortisation (Ebitda), including its quick-commerce business Blinkit, were positive for the third quarter in a row at Rs 125 crore, compared to Rs 41 crore in Q2FY24.

Adjusted Ebitda margin of 5.3 per cent, meanwhile, came in ahead of analysts' estimates of around 4 per cent, primarily driven by operating leverage. Food delivery contribution margin expanded 50bp quarter-on-quarter (Q-o-Q) to 7.1 per cent, aided by the higher take rate. The Management continues to expect margins to expand further due to better cost absorption on account of strong growth.

"The growth was fueled by Blinkit, which rose 27 per cent Q-o-Q, while food delivery revenue grew 10 per cent Q-o-Q, driven by a higher take rate (20.1 per cent, +70bp Q-o-Q). This was partially driven by better ad monetisation on the platform," Motilal Oswal Financial Services (MOFSL) said.

The food delivery business is still in a nascent stage in India, with a long runway for growth. With a dominant market share and strong growth in the food delivery business and Hyperpure, the brokerage firm expects Zomato to report a strong 38 per cent adjusted revenue CAGR over FY24-26. After turning positive at the margin level in Q3, we now estimate Zomato to deliver 4.5 per cent/10.0 per cent Ebitda margin in FY25E/FY26E," MOFSL said in the result update.

"Zomato continues to be one of our preferred picks in the listed Internet space as we believe it is well positioned to benefit from robust industry tailwinds for the hyper local delivery businesses. Its balance sheet also remains strong with net cash of Rs 12,000 crore as of December 2023 (Rs 11,800 crore in September 2023)," said analysts at JM Financial Institutional Securities in their result update report.