'Sell' Eternal Shares Maintains Dolat Capital Post Q1 Results — Here's Why

Eternal's Ebitda margin at 1.6% was below estimates (our estimate: 2.9%), due to higher losses in the Going Out and Others biz. (Rs 540 million/ 450 million loss), while Hyperpure and Blinkit losses lowered as both biz. lowered incremental costs vs revenue. However, fierce competition in quick commerce and slowing food delivery biz. remain an overhang on sustainable growth and profitability.

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Dolat Capital Report

Eternal Ltd., Zomato's parent reported revenue growth of 22.9% QoQ (our estimate: 10.8%) at Rs 71.7 billion, driven by Blinkit and HyperPure biz, which grew 40%/24.7% QoQ. Food delivery business grew 10% QoQ (16% YoY), continuing to see demand moderation.

Ebitda margin at 1.6% was below our estimates (our estimate: 2.9%), due to higher losses in the Going Out and Others biz. (Rs 540 million/ 450 million loss), while Hyperpure and Blinkit losses lowered as both biz. lowered incremental costs vs revenue However, fierce competition in quick commerce and slowing food delivery biz. remain an overhang on sustainable growth and profitability.

Commentary suggests peaking of QC losses, which we believe is due to leveraging of inventory model (to shift ~Rs 1.5 billion of order inflow into Operating profits), yet fierce competition in the segment would limit potential for meaningful turnaround in overall profitability.

FY26 earnings more than halved, while FY27E earnings lowered by 16.5%. Noting potential risks and steep valuations, we maintain ‘Sell’ rating with DCF-based target price of Rs 170 (implies ~84x on FY27e EPS).

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