Despite a 90% year-on-year drop in Q1FY26 profit, Eternal Ltd (Zomato’s parent company) assuaged investor concerns with optimistic management commentary and strong growth in its quick commerce business Blinkit. Brokerages have given the stock a thumbs-up, with analysts predicting that Blinkit’s losses have peaked and margin improvements are on the horizon.
Blinkit's revenue during the quarter surged to Rs 2,400 crore, surpassing Zomato’s food delivery revenue of Rs 2,261 crore. Overall, Eternal's consolidated revenue grew 70% year-on-year to Rs 7,167 crore in Q1, exceeding the street estimate.
Blinkit’s adjusted EBITDA margin improved to -1.8% of net order value (NOV) in Q1FY26 (from -2.4% in Q4FY25), despite adding 243 new dark stores. Eternal management believes absolute losses have peaked and margins will continue to improve as recently opened stores mature.
Eternal cited that there is already a 2.5%+ margin in some cities, reinforcing long-term guidance of 5-6% EBITDA margins. The store count is expected to increase from 1,550 to 2,000 by December 2025.
Eternal’s commentary on improving business was widely welcomed by investors as the stock hit a record high of Rs 311.25 on Tuesday, rallying nearly 15% intraday and emerging as the top gainer on the Nifty 50 index. The effect of Zomato’s earnings was also seen on the shares of its biggest rival Swiggy which rose 6% to settle at Rs 418 apiece.
Global brokerage firm Jefferies has upgraded the stock to a 'Buy' rating and raised its price target to Rs 400. It stated that while Q1 performance was mixed, management commentary was significantly positive, particularly on quick commerce, which marks a shift from previous quarters. CLSA and Bernstein also had a buy call on the stock.
Domestic brokerage firm Motilal Oswal Financial Services said that Eternal’s food delivery business is stable, and Blinkit offers a generational opportunity to participate in the disruption of industries such as retail, grocery, and e-commerce.
“We lower our FY26/FY27 estimates by 14%/18%, factoring in continued dark store expansion and Rs 150 crore in FY26 losses from newer initiatives such as Bistro (10-minute food delivery) and Nugget under the “Others” segment. Eternal should report PAT margin of 3.1%/6.5% in FY26E/FY27E,” said Motilal Oswal.
Macquarie, on the other hand, has an ‘underperform’ rating and a price target of Rs 150 per share, a 50% downside from Tuesday's closing. It believes that food delivery growth has lagged and the competitive intensity remains high.