Zomato Q2 Results Review - Another Quarter Of Strong Beat; Blinkit Continues To Surprise: Motilal Oswal

BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..Motilal Oswal Report.Zomato Ltd. delivered another good quarter, with Q2 FY24 revenue growth of 18% QoQ (Rs 28.5 billion) beating our estimates of 11% growth. Growth was led by Blinkit, up 31.5% QoQ. The food delivery business also outperformed, with revenue growth of +12.7% QoQ on the back of strong order volume. Adjusted Ebitda margin at 3.0% missed our estimate of 3.6%, partly due to lower profitability in gold customer orders (40% of total gross order value). The management expects further expansion in margins, as the gap between Gold and non-Gold customers narrows with scale, helping it move toward food delivery adjusted Ebitda margin of 4-5% of GOV. Zomato continues to expect a breakeven in Blinkit in Q1 FY25 despite maintaining a high pace of new store addition. The performance of food delivery and quick commerce businesses was promising. With the company expecting strong growth for both Blinkit and food delivery in Q3 FY24, we expect Zomato to deliver a strong 65% YoY growth in FY24. Zomato should deliver a revenue compound annual growth rate of 32%/116% in food delivery/quick commerce verticals over FY23-25, helping it grow its consolidated adjusted revenue by 53% over the same period.  The company was successful in increasing its take rate by a sharp 70 bp QoQ in food delivery with the introduction of platform fee and continued traction in ad monetisation. While we expect the pace of the take rate increase to start moderating now, advertisements remain a potential driver of further upside on take rate and profitability of the business. Blinkit’s contribution margin turned positive in Q2 on the back of strong growth. Strong revenue growth should drive significant margin leverage, given the fact that competitive pressure in quick commerce has eased considerably over the last few quarters due to a funding crunch for smaller peers. We now estimate Zomato to turn positive on reported Ebitda by Q3 FY24 (earlier Q4 FY24) and deliver 4.1% Ebitda margin in FY25. As a result, Zomato should report profit after tax of Rs 2.4 billion/Rs 8.8 billion in FY24/FY25. We remain positive about the long-term growth opportunity for Zomato and do not expect competition to intensify further despite the entry of ONDC in the space. Our discounted cash flow-based valuation of Rs 135 suggests a 16% upside from the current price. We reiterate our 'Buy' rating on the stock..Click on the attachment to read the full report:.Zomato Q2 Results Review - Strong Beat; Challenges Overcome To Deliver Positive Surprises: Dolat Capital.DISCLAIMERThis report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Zomato Q2 Results Review - Another Quarter Of Strong Beat; Blinkit Continues To Surprise: Motilal Oswal

Medium-term visibility remains strong; reiterate 'Buy'

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