Zomato shares: Due to concerns about its near-term profitability, Zomato Ltd.’s estimate of adding 500 new stores in FY25 was viewed as aggressive, resulting in a 6% decline in the company’s shares on Tuesday. Nonetheless, analysts still favor the stock and set price targets between 225 and 300.
While cutting EPS expectations by 5–22% for FY25–27, Kotak has improved revenue estimates but included greater ESOP costs and reduced near-term profitability in Blinkit. The brokerage feels that the FY2025 store addition projection was overly ambitious and would have a negative immediate impact on profitability.
The Zomato stock dropped 5.98% on Tuesday, reaching a low of Rs 182.10 on the BSE.
Blinkit’s shop addition, according to ICICI Securities, is a calculated strategy to increase its market share in rapid commerce through geographic growth at a time when rivals are still concentrating on increasing profits.
“We have revised up our Blinkit adjusted Ebitda estimate by 11.4 percent for FY26, while we have lowered our estimate for FY25E by 68%. While gold plan optimization and priority delivery could help further profit improvement, we believe that recent developments in bulk ordering and a veg-only fleet can enhance revenue growth in the food delivery industry,” ICICI Securities said, retaining a “Buy” rating on the company with a target price of Rs 300.
Zomato’s fourth-quarter results, according to UBS, met UBS projections for gross order value (GOV) and revenue but fell short of EBITDA projections because of increased labor expenses.
Zomato intends to ‘double down’ on fast commerce with plans to add 100 outlets (526 as of end-March) in Q1FY25 and reach 1,000 stores by end-FY25, according to the brokerage. The company claimed that the guidance of 40%-plus YoY growth in adjusted revenues for the next couple of years remained valid.
UBS kept its Zomato price objective of Rs 250 and maintained its ‘Buy’ rating. The adjusted EBITDA margin is predicted to “hover around zero level” for the next few quarters, with a medium-term aim of 4-5 oer cents, notwithstanding Blinkit’s rapid expansion.
Zomato has a lot of space to develop in the quick commerce and food delivery sectors, according to Nomura India, given its strong growth trajectory and increasing profitability. It has increased its target price for the company from Rs 180 to Rs 225 in light of the expected longer-term growth of both of the major businesses.
Shortly, we think Zomato will probably be able to strike a compromise between its growth and profitability goals in this industry. We anticipate that FD will contribute 7.5 percent (+60 bps compared to FY24F) and 20–22 percent y-y growth in GOV in FY25F–26F,” the statement stated.
Zomato hopes to bring quick-commerce penetration to Delhi levels in the top 8 cities (after the National Capital Region), which might result in four times more government in those areas. While ESOP costs increased in Q4FY24 as a result of senior workers and the Blinkit leadership team being granted ESOPs, UBS predicted that overall personnel expenditures as a percentage of revenue would continue to decline.
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