Shares of Zomato Ltd. rose to the highest level in over 20 months after brokerages raised the target price to factor in strong volumes due to the festive season and the ICC Men's Cricket World Cup 2023.
Kotak Institutional Equities and ICICI Securities have both reiterated their positive stance while raising the target price on Zomato, implying a potential upside of 14% and 50%, respectively.
Kotak cited the improving demand trends in non-metro cities, while ICICI highlighted strong order flows during the festive season along with a shared view on tailwinds welcomed by the World Cup. The average of 12-month analyst price targets implies a potential downside of 1.2%.
Kotak Institutional Equities
Reiterates 'buy' rating and revises target price to Rs 125 from earlier Rs 110, implying a potential upside of 14.6%.
It said growth in gross merchandise value bottomed out in the first quarter at 14% and should see performance improvement in the second quarter.
Upgrades GMV growth estimates for fiscal 2024–26 to 18% due to better demand for food delivery.
Growth is driven by higher ordering intensity, improving demand trends, especially in non-metro cities, a favourable base, and higher volumes.
Food-delivery take rate rose by 92 basis points during the first quarter due to a 200-bps expansion in restaurant take rate, countering the compression in delivery take rates due to 'Zomato Gold Programme'.
Implementing a minor commission increase for the platform, imposing a platform fee could offset competitive pricing in loyalty programme offered by competitor Swiggy.
The company remains on track to achieve Ebitda profitability in Blinkit by the next financial year.
Hyperpure to earn Ebitda profit from fiscal 2026.
ICICI Securities
Reiterates 'buy' rating and raises the target price to Rs 160 from the earlier Rs 120, implying a potential upside of 50%.
Estimates 4% adjusted Ebitda to be achieved by the third quarter.
Growth is to be led by strong order volumes and average order values during the festive season and the World Cup.
Expects a 220-bps profitability improvement over the next four quarters due to an increase in ad revenue, gold revenue, and contribution from platform fees.
The brokerage said it could turn contribution positive on a full-quarter basis by the second quarter.
It can report positive adjusted Ebitda with a rise of 620 bps over the next four quarters due to scale benefits on corporate overheads, a decrease in fulfilment costs, mix improvement, and an increase in ad revenue.
Shares of Zomato rose 3.9% during the day to Rs 113.25, the highest since Jan. 24, 2022. The stock was trading 2.48% higher at Rs 111.65 apiece compared to slim gains in benchmark NSE Nifty 50 as of 12.09 p.m.
The average traded volume so far in the day stood at 1.1 times its monthly average, while the relative strength index was at 70, indicating the stock may be overbought.
Twenty-five out of the 29 analysts tracking Zomato maintain a 'buy' rating on the stock and four suggest 'sell', according to Bloomberg data. The average of 12-month analyst price targets implies a potential.
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