Zomato share price: Emkay Global raises target driven by Blinkit; sees 17% more upside

livemint.com:

₹230 per share from ₹170 earlier largely driven by Blinkit and has retained its ‘Buy’ rating on the stock. It values the food delivery business at ₹121 (DCF basis), Blinkit at ₹90 (DCF basis), and cash and other investments at ₹18 (book value).

The new target price for Zomato shares implies a potential upside of more than 17% from Thursday’s closing price. Also Read: SBI share price extends gains as analysts remain bullish after upbeat Q4 results; Should you buy the stock? The brokerage firm increased its revenue estimates by 0-2% and profit and EPS estimates by 42-53% for FY25 and FY26E, factoring-in better profitability in Quick Commerce and lower ETR.

Zomato’s food delivery Gross Order Value (GOV) grew 20.5% in 9MFY24 after being muted for the previous three quarters. Emkay Global expects healthy growth momentum in the near term on the back of steady increase in MTUs and ordering frequency, benefits accruing in take rate from new restaurants addition and reducing dispersion in commission rates and platform fees.

The three major Quick Commerce (QC) companies in India – Blinkit, Instamart, and Zepto — have found good product market fit in metros and large cities and are gradually expanding their coverage in these markets and testing adjacent markets in a calibrated manner. Also Read: Market Meltdown: Indian stocks lag behind global peers in May – key reasons explained The QC companies have seen limited success globally and key variables driving success in India are: i) population density, ii) high prevalence of unorganized retail/local kirana stores enables QC companies to exercise relative buying power with scale, and iii) cheap labor costs, Emkay Global senior research analyst Dipeshkumar Mehta said in a note.