NEW DELHI: Back in June 2022 when Zomato announced its decision to acquire loss-making quick commerce firm Blinkit, there was wide scepticism that this purchase would delay the company’s path to profitability. Following this, Zomato’s losses swelled in the coming quarters and its shares took a big beating. In the following month, the stock rock-bottomed to about Rs 40 apiece, a sharp fall from the Rs 150 level of November 2021.
However, it took only a few quarters for the food tech giant to bounce back and become a highly profitable firm. Zomato on Thursday reported a profit after tax (PAT) of R138 crore in the December quarter (Q3FY24), helped by sharp growth in its quick commerce business and resilience shown by its food delivery business despite macro headwinds.
Zomato had reported a PAT of Rs 36 crore in the preceding quarter and a net loss of Rs 346.6 crore in Q3FY23. Zomato’s operating revenue surged 68% year-on-year to Rs 3,288 crore in Q3FY24 from Rs 1,948.2 crore in Q3FY23. One of the key highlights of Zomato’s result was that the company reported annual as well as sequential revenue growth across its different segments: Food Delivery, Hyperpure, Quick Commerce, Going Out and Others.
While a big chunk of its profit came in from the food delivery business, it was the quick commerce segment which saw a remarkable recovery. This segment’s Adjusted EBITDA improved from -227 crore in Q3FY23 to - 89 crore in the recently concluded quarter. Deepinder Goyal, Founder, MD & CEO said that the company’s consolidated topline (Adjusted Revenue) continues to grow meaningfully above their stated expectation of 40% + YoY. Infact, at this point, we expect the topline to continue growing at 50% + YoY, said Goyal.
On Blinkit, the CEO said that GOV growth at 103% YoY (28% QoQ) continues unabated. “Losses continue to decline and we are on track to meet our guidance of Adjusted EBITDA break-even on or before Q1FY25,” said Goyal.
Analysts at JM Financial said Zomato reported a very strong quarter in 3Q, as most headline numbers were either in line or ahead of their estimate, amidst tough macros. Analysts at Motilal Oswal expect Zomato to deliver a strong 70%/41% YoY growth in FY24/FY25, with Blinkit outpacing the food delivery business because of geographical expansion, improvement in order frequency, and moderation in a competitive environment in the quick commerce industry.
“Over FY23-26E, Zomato should deliver a revenue CAGR of 29%/99% in food delivery/Blinkit verticals, helping it grow its consolidated adj. revenue by 42% over the same period. Zomato turned positive and reported an EBITDA in 3QFY24. It delivered a margin of 1.6% against -1.7% last quarter. With continued growth momentum, the company should report a healthy EBITDA for FY24 and a good 4.5% EBITDA margin in FY25. This should in turn help Zomato report a PAT of R3.6b/ R9.5b in FY24/FY25,” said Motilal Oswal. Zomato’s consistent growth has made the stock a top pick among investors.
The company’s share prices have gained 188% in the last one year. With a market cap of Rs 1.30 lakh crore, Zomato is now valued more than new-age firms such as Paytm, Nykaa, Delhivery and Cartrade (one can even add the struggling Byju’s) combined. Going forward, the street expects the company’s share to hit new highs. While Jefferies has raised the target price to Rs 205, Bernstein has set a target price of Rs 180 with an outperform call on the firm. Motilal Oswal maintains a BUY rating with a TP of Rs 170 and JM Financial has a TP of Rs 200 for the stock.