News Update

According to Jefferies, Zomato could increase by up to 38% to Rs 100

• ByStartupStory     |    November 14, 2022

Global brokerage Jefferies maintained its buy rating on Zomato with a target price of Rs 100 per share, implying an increase of 38% from the current market price of Rs 72.40, citing break-even in the food delivery business and positive growth outlook in Blinkit.

On November 10, the online meal delivery service announced a smaller consolidated net loss for the second quarter that ended September 2022 of Rs 250.8 crore as opposed to Rs 434.9 crore in the same quarter the previous year.

During the quarter of July through September, Zomato’s operating revenue increased to Rs 1,661.3 crore from Rs 1,024.2 crore during the same period the year prior.

According to the business, this is the first quarter in which it has exceeded the milestone of $1 billion in annualised revenue. From Rs 1,601.5 crore a year ago, its overall expenses increased to Rs 2,091.3 crore during the quarter under review.

Zomato’s gross order value increased by 3% quarter over quarter and 23% year over year, driven by increases in both order volumes and average order value. Higher adjusted revenue growth was achieved in the food delivery industry as a result of the increase in revenue per order.

Regarding profitability, the contribution margin as a percentage of gross order value significantly increased from 2.8% in Q1 to 4.5% in Q2. Due to this, the food delivery sector achieved operating breakeven in Q2.

“In the medium term, getting food delivery is our goal.” Founder and CEO Deepinder Goyal stated in a release that adjusted EBITDA was between 4 and 5 per cent of the company’s GOV (gross order value). The number of average monthly active users increased by 4.4% QoQ to 17.5 million in Q2.

Although the meal delivery industry has been expanding and moving gradually in the direction of profitability, Zomato stated in a release that the industry has room to develop far quicker than it is currently doing.

According to Zomato, increasing rates of repeat business from the current client base as well as new customer additions would be the main drivers of the rise in monthly transacting customers.

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