Zomato share price hits new high, up 27% in one month; m-cap nears Rs 3 trn

At 11:49 am; with Rs 2.91 trillion market-cap Zomato was trading 5% higher at Rs 301.50, as against 0.38% decline in the BSE Sensex.

Shares of food delivery major Zomato hit a new high of Rs 304.50, surging 6.4 per cent on the BSE in Thursday’s intra-day trade amid heavy volumes on expectations of a strong outlook. The stock surpassed its previous intra-day high of Rs 298.2 scaled on September 24, 2024, before closing at Rs 299.50.

 

In the past one month, Zomato stock outperformed the market by soaring 24 per cent, as compared to 2.9 per cent gain in the BSE Sensex. This sharp rally in the stock price has seen Zomato’s market capitalisation inch towards the Rs 3 trillion-mark. According to Thursday's closing price, Zomato is now valued at Rs 2.89 trillion. The average trading volumes at the counter more-than-doubled with a combined 110 million equity shares changing hands on the NSE and BSE.

 

 

Zomato on Friday announced that it raised Rs 8,500 crore (a little over $1 billion) through a qualified institution placement (QIP) in its first major fundraise since public listing in July 2021. The company’s board, in a meeting held on November 29, approved the issue and allotment of 336.47 million equity shares at an issue price of Rs 252.62 per share. At present levels, the stock trades 18.6 per cent higher than its QIP issue price. 

 

 

The fundraise is aimed at strengthening Zomato’s balance sheet and fuelling its expansion plans, as competition is heating up in the quick commerce and food delivery space. As much as Rs 2,137 crore will be used to expand Blinkit’s network of dark stores and warehouses. The firm’s cash balance stood at Rs 10,800 crore as at the end of the second quarter of the current financial year (Q2FY25). The new funds would take this to Rs 19,300 crore.

 

Meanwhile, Zomato has executed almost perfectly across food delivery (FD), quick commerce (QC) and Go Out (GO) both in terms of growth and profitability over the last two years, according to analysts. This has helped Zomato to create the highest cash earnings before interest, tax, depreciation and amortisation (EBITDA) and free cash flow (FCF) profile and growth across listed consumer Internet businesses which deserves a premium multiple.

 

With a strong brand value and increasing demand for business-to-consumer (B2C) business and quick commerce, analysts at Axis Securities believe Zomato will demonstrate exponential growth from FY25 to FY26. 

 

Analysts at the brokerage firm said they are confident that Zomato's expansion in the food delivery space and at Blinkit is supported by consistent improvements in profitability and a significant reduction in losses within the hyperpure and quick commerce domains. Moving forward, these attributes are expected to drive higher volume and revenue growth. 

 

“We anticipate the company will report Revenue/EBITDA/APAT CAGRs of 25 per cent/60 per cent/55 per cent, respectively, over FY25E-FY28E, driven by volume growth and realisation improvement during the same period,” the brokerage firm said in its September quarter result update. Hence, the analysts said they maintain BUY rating on the stock and value it at Rs 350 on an SOTP (sum-of-the-parts) valuation.

 

JP Morgan has an overweight rating on Zomato with a one-year target price (TP) of Rs 340 per share. The brokerage firm believes the food delivery business is on a path to profit and margin expansion along with strong growth from under-penetration that provides large TAM (total addressable market), the Blinkit business has achieved breakeven at CM and Ebitda level and should see continued strong growth even as margins remain flat, and the Going Out business will be the “next big thing” and is already a profitable business.

 

Except for a couple of brokerages, most are bullish on the stock including the likes of Goldman Sachs, Bernstein and Morgan Stanley.