Zomato Gets 'Reduce' As HDFC Securities Initiates Coverage — Here's Why

For Zomato, the brokerage projects a 36% consolidated sales CAGR (including 19%/65% gross sales CAGR for food delivery/quick commerce segments, respectively), with moderating adjusted Ebitdam (from 5.3% to 4.4%) as QC skew continues to rise in the mix.

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HDFC Securities Institutional Equities

In food delivery, the duopoly structure is likely to ensure eventual convergence of fortunes for the two incumbents; however, the jury is still out on the path to convergence in quick commerce.

We remain in the camp that execution variance among platforms is likely to widen in the long term with Blinkit leading the pack. For Zomato Ltd., we project a 36% consolidated sales CAGR (including 19%/65% gross sales CAGR for food delivery/quick commerce segments, respectively), with moderating adjusted Ebitdam (from 5.3% to 4.4%) as QC skew continues to rise in the mix.

RoICs are expected to be largely stable (9 to 10.5%) over FY25-27. We initiate coverage on Zomato with a Reduce rating and an SOTP-based target price of Rs 235/share (implying 6x FY27 price/sales). Note – We have reduced Swiggy's target price to Rs 455/share (earlier Rs 475/share).

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