Zomato Shares Rise as Jefferies Forecasts Up to 29%

Zomato's stock experienced a slight increase on monday following Jefferies' decision to maintain a ‘buy’ rating with a base case target price of Rs 335. This target suggests a possible upside of 29% compared to Friday’s closing price.

According to Jefferies, zomato is positioned to benefit from the expanding food services market in india and the growing adoption of wallet PLATFORM' target='_blank' title='digital-Latest Updates, Photos, Videos are a click away, CLICK NOW'>digital commerce. With approximately 20 million active users per month, zomato has substantial potential for acquiring more customers and boosting revenue. The brokerage also highlighted Blinkit’s leadership in the burgeoning quick-commerce sector and its expected margin improvements.

Jefferies projects a compound annual growth rate (CAGR) of around 20% in Zomato’s delivery revenue from FY24 to FY27. As zomato scales up, it is anticipated that operational efficiencies and customers’ willingness to pay for convenience will enhance unit economics.

The brokerage values Zomato’s delivery segment at 55 times its adjusted EBITDA for two years ahead, quick commerce at 12 times its two-year forward sales, and the going-out segment at 2.5 times its gross order value (GOV). In a more optimistic scenario, Jefferies has set a target price of Rs 360, reflecting a potential 40% upside with a projected 25% CAGR in delivery revenue over the same period. However, in a downside scenario, the target price is set at Rs 200.

Jefferies outlined several factors that could influence the stock's performance in the near term. Positive drivers include a favorable macroeconomic environment, increased discretionary spending, accelerated wallet PLATFORM' target='_blank' title='digital-Latest Updates, Photos, Videos are a click away, CLICK NOW'>digital commerce adoption, and improved trends in average order values (AOVs) and unit economics. Successful expansion into the grocery segment could further boost growth. On the other hand, risks include heightened competition, slower market growth than expected, and unfavorable regulatory changes affecting platform businesses.

Currently, Zomato’s shares are trading flat at Rs 259.85 on the National Stock Exchange (NSE). The stock has surged 108% this year, significantly outperforming Nifty’s 16% gain. Over the past 12 months, it has risen over 150%, more than doubling investors' capital, while Nifty has increased by 28% during the same period.
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Subashini

09/09/2024 05:40 PM