Zomato’s share price fell as much as 8.7%, to Rs 218.95, intra-day. The fall came after the company’s net profit declined in the third quarter of FY25.
On January 20, the food delivery company reported a fall of 57.2% year-over-year drop in its net profit for Q3 FY25 standing at Rs 59 crore. The company posted a net profit of Rs 138 crore in the same quarter a year ago. Sequentially, it has fallen 66.5%. Zomato’s net profit in Q2 FY25 was Rs 176 crore.
However, its revenue from operations rose 64% on year to Rs 5,404 crore in Q3 FY25, as against Rs 3,288 crore in Q3 FY24. Although, it was down from Rs 4,799 crore, which it reported in the previous quarter.
Macquarie says competitive intensity impacted profitability
The brokerage house, Macquarie Capital Securities, said that for the shares it has a limited margin of safety. This is due to rising competition in the Q-Commerce space, which is “denting consensus forecasts.” The brokerage firm forecasted a gross order value of Blinkit to increase by 3.5 times over the next three years. This was raised along with the EBITDA margin, but due to “hyper-competition” there could be a prolonged period of negative margins. It has maintained its ‘Underperform’ rating on the stock of Zomato, with a target price of Rs 130, implying a 55 times P/E for FY27.
UBS says strong growth in quick commerce offsets moderation in food delivery
The brokerage firm, UBS, said that while the slowdown in food delivery surprised, Zomato’s margin expansion was a positive point. However, Blinkit’s growth being on the higher side was a surprise. It expects Blinkit’s gross order value to grow by more than double at least for FY25 and FY26. Plus, the marginal margin decline in Blinkit was also expected due to the increased competition in the space. As Zomato is focusing on store expansion and that phase slows down, Blinkit’s margin expansion will accelerate. The brokerage has a ‘Buy’ rating on the stock, with a target price of Rs 320.
Nuvama bets on aggressive store expansion
Blinkit’s dark store additions are outpacing expectations and driving faster growth but the higher upfront cost for store openings may dent profitability in the short term. However, the addition of dark stores shall ultimately lead to bunching up of profitability in future quarters as these stores mature.
» Read More
