Zomato Shares Hit New Highs Ahead of Q1 Results: Preview and Target Price

• Zomato’s shares reach a new 52-week high ahead of its Q1 results announcement.
• Brokerages expect strong topline growth and a significant rise in net profit for the quarter.
• Key factors include EBITDA performance, Blinkit’s operational performance, and management’s future outlook.

What to Expect from Zomato’s Q1 Results?

As Zomato prepares to announce its quarterly results for the three months ending June 30, 2024, brokerages are forecasting robust growth. Analysts predict that the company will report revenues between Rs 3,800-4,000 crore, representing a 40% year-on-year (YoY) increase and an 8-10% sequential rise. EBITDA is expected to be around Rs 150 crore, with margins in the range of 3.9-4.3%. Net profit could see a manifold increase, estimated to be in the range of Rs 175-240 crore.

Kotak Institutional Equities forecasts a 59% YoY revenue growth for Q1FY25, driven by a 35% YoY increase in food delivery revenues, a 65% YoY growth in Hyperpure revenues, and a 125% YoY surge in Blinkit revenues. The brokerage has issued a ‘buy’ rating on Zomato’s stock.

Equirus Securities expects a 6% QoQ growth in food delivery Gross Order Value (GOV) and a 14% QoQ growth for Blinkit. They predict sequential Adjusted EBITDA margin improvements of 29 basis points for food delivery and 99 basis points for Blinkit. Equirus maintains a ‘long’ rating on Zomato with a target price of Rs 240 per share.

JM Financial suggests that Blinkit should achieve Adjusted EBITDA break-even by 1QFY25, aligning with management’s guidance. However, they anticipate that Zomato will prioritize growth investments amidst increasing competition. The management’s guidance for adjusted EBITDA to hover around zero for the next few quarters reflects the evolving business environment.

How Have Zomato’s Shares Performed?

On Thursday, Zomato’s shares rose by about 2% during trading, reaching a new 52-week high of Rs 234 per share. The company’s market capitalization surged to Rs 2.05 lakh crore, tripling its value from its 52-week lows.

Key Factors to Watch

Analysts are closely monitoring several factors that will influence Zomato’s performance:

1. EBITDA Performance: Quarter-on-quarter (QoQ) EBITDA performance is a critical metric for assessing the company’s operational efficiency.
2. Blinkit’s Operational Performance: The profitability and growth of Blinkit, Zomato’s quick commerce business, will be closely watched.
3. Food Delivery Charges: Increases in platform charges for food delivery could significantly impact revenue.
4. Management’s Commentary: The management’s outlook for future quarters will provide insights into the company’s strategic direction.
5. Market Share and Order Volume Growth: Market share changes and growth in monthly transacting users (MTUs) and order volumes in the food delivery segment.
6. Dark Store Additions: The net addition of dark stores for Blinkit and their impact on profitability.

Conclusion

Zomato’s Q1 results are eagerly anticipated, with strong growth expected across various segments. The company’s shares have reached new highs, reflecting positive market sentiment. However, the focus will be on EBITDA performance, Blinkit’s operational success, and the management’s strategic commentary. Investors and analysts will be keenly watching these factors to gauge Zomato’s future growth trajectory and market position.