Zomato Gains Ahead of December Quarter Results; What Investors Should Know

Zomato’s stock was quoting at Rs 56.10 apiece on the National Stock Exchange, higher by 3.3 per cent in early trade on Thursday. With Paytm achieving operating profitability in Q3, all eyes are now on Zomato’s October-December 2022 quarter results to find out if the new-age tech company can follow in its peers’ footsteps.

Yesterday, shares of Zomato rose over 8 per cent in early trade amid a rally in the broader markets. The rise in Zomato stock came amid founder of the food aggregator firm Deepinder Goyal congratulating Paytm and its founder Vijay Shekhar Sharma on their Q3 earnings show.

The food delivery platform is expected to post a 68 per cent on-year jump in revenue from operations but losses might widen, according to brokerages.

A large part of the optimism comes on the back of foreign brokerage CLSA’s ‘Buy’ rating of the stock with a target price of Rs 70.

According to Kotak Institutional Equities, Zomato’s revenue from operations might jump 68 per cent year-on-year and 12.6 per cent sequentially to Rs 1,871 crore, on account of higher deliveries and gross merchandise value.

However, net loss might double from Rs 251 crore to Rs 500 crore due to the integration costs of Blinkit. “Losses will expand sequentially on account of full quarter consolidation of Blinkit (versus 50 days of consolidation in 2Q),” it noted.

Last month, the stock took a knock after reports said that it will be discontinuing its 10-minute food delivery offering, Zomato Instant. But, the company clarified that it will be ‘rebranding’ Instant and not discontinuing it.

A strong large footprint makes Zomato a key contender to benefit from the immense potential in the food delivery industry, believes brokerage Motilal Oswal, who has a buy recommendation on the new-age tech stock with a target price of Rs 67. From current levels, it indicates an upside of 24 per cent.

“Its food delivery gross order value (GOV) grew by 23 per cent YoY in Q2FY23 led by healthy ~200 per cent YoY growth in Hyperpure business. Management has guided for EBITDA breakeven for ex- Blinkit business by Q2FY24. Also, management in its recent commentary indicated that the firm is working to enhance its profitability,” Motilal said.

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