Zomato surges 14% as firm turns profitable for first-time in June quarter
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Shares of Zomato hit a 18-month high at Rs 98.39, as they surged 14 per cent on the BSE in Friday’s intra-day trade amid heavy volumes after the company turned profitable for the first-time ever in the first quarter of 2023-24 (Q1FY24).
The stock was trading at its highest level since February 2022. With today’s rally, the market price of the company has bounced back 122 per cent from its all-time low of Rs 44.35 touched on January 25, 2023. At 09:36 AM; the stock was quoting 10 per cent higher at Rs 95.20, as compared to 0.5 per cent rise in the S&P BSE Sensex. The average trading volumes at the counter jumped nearly 1.5 times today. A combined 160 million shares had changed hands on the NSE and BSE.
Food aggregator platform company reported a consolidated profit after tax of Rs 2 crore compared to a loss of Rs 186 crore in the year-ago period. Revenue from operations grew 71 per cent year-on-year to Rs 2,416 crore in Q1FY24, up from Rs 1,414 crore in the corresponding period a year ago.
Revenue growth was led by the food delivery business (up 17 per cent quarter-on-quarter (QoQ)). While Blinkit was muted (+5 per cent QoQ) due to disruptions in April-May, it should reverse in July-September or Q2 quarter (20 per cent QoQ growth guidance).
Zomato’s adjusted earnings before interest, tax, depreciation, and amortisation (Ebitda), including its quick commerce business Blinkit, turned positive for the first time ever at Rs 12 crore, compared with a loss of Rs 175 crore in the previous quarter (Q4FY23).
The management has guided for strong 40 per cent/ 60 per cent plus growth for Zomato (consol)/Blinkit over the next few years, which surprised us on the upside, Motilal Oswal Financial Services (MOFSL) said in its result update.
The brokerage firm said it sees the strong all-round performance from Zomato as an indicator of an accommodative competitive environment in both food delivery and quick commerce verticals. Moreover, the sharp 80 bps QoQ increase in take rate in food delivery highlights its success in cross-selling ads to restaurants, which is a more sustainable revenue stream rather than depending on increase in take rate.
The food delivery business is still in a nascent stage in India with a long runway for growth. With a dominant market share and strong growth in the food delivery business and Hyperpure, MOFSL said.
It expects Zomato to deliver 25 per cent/107 per cent revenue CAGR in food delivery/quick commerce verticals over FY23-25, helping it grow its consolidated adjusted revenue by 43 per cent over the same period. “We now estimate Zomato to turn positive on reported EBITDA by 4QFY24, and deliver 5 per cent EBITDA margin in FY25, which should further drive profitability,” the brokerage firm said.
The stock has been trading with a positive bias since early April 2023. The price-to-moving averages action continues to favour the bulls on the chart.
Further, with today's sharp up move the stock is seen trading above the higher-end of the Bollinger Bands on the daily chart. Thus, indicating that the bias is likely to remain bullish as long as the stock holds above Rs 91.
On the upside, the stock can target Rs 102, which could act as a critical resistance suggests the monthly chart. In case of a dip, the stock may seek support around its 100-WMA (Weekly Moving Average) placed at Rs 80 odd levels.
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