The stock price of Zomato has recovered 63 per cent from its 52-week low level of Rs 40.55, touched in July 2022. It had hit a 52-week high of Rs 79.80 in June last year.
Motilal Oswal Financial Services (MOFSL) had, last month, initiated coverage on Zomato with a ‘BUY’ rating and Rs 70 target price.
The food delivery business, the brokerage said, is still at a nascent stage in India with a long runway of growth. With dominant market share and strong growth in the food delivery business and Hyperpure, it expects Zomato to report a strong 29 per cent CAGR over FY23-25. Though management expects it to be profitable latest by Q2FY24, and believe the company should breakeven during FY25.
The strong growth will be complemented by Zomato turning profitable over FY25, with gross margin improving to 33.5 per cent in FY25 from 5.3 per cent in FY22. Heightened competition for Blinkit and attrition at senior leadership are areas of concern, MOFSL said.
Meanwhile, analysts at JM Financial Institutional Securities said they continue to remain bullish on the company’s long term prospects in the hyper local delivery space as they believe it is well positioned to benefit from robust industry tailwinds such as improving tech penetration and rising income share of digitally native millennials / GenZ.
The brokerage firm expects sequential recovery in the June quarter due to IPL seasonality and the low base effect. “From a medium-term perspective however, we now expect Zomato to report CAGR growth of 21 per cent over FY23-27 (roughly 1.5x of the expected growth for organised food services market) due to its growing focus on high-quality growth and the fact that penetration of the online channel in the organised food services market is already quite high at ~33 per cent, meaning incremental gains could be slower than in the past,” it added.
First Published: May 04 2023 | 2:47 PM IST