Shares of Zomato, the prominent food delivery major, experienced a surge of 2.5%, reaching a 52-week high of INR 138 per share on the BSE during Thursday’s trading session. This uptick came on the heels of HSBC, a global brokerage firm, reaffirming its ‘buy’ rating on Zomato and elevating its target price for the stock by Rs 10 to INR 150 per share.
Despite projecting subdued growth in the calendar year 2024, HSBC analysts expressed a positive long-term outlook for Zomato. The optimistic assessment contributed to the favorable market response, propelling Zomato’s shares to new highs.
In a recent move, Elara Securities also recommended a “buy” rating for Zomato after the foodtech giant increased its platform fee for food delivery services by 33%, raising it from INR 3 to INR 4 per order. Elara Securities set a target price of INR 150, emphasizing the potential impact of the convenience fee increment on Zomato’s adjusted Ebitda.
“We believe the uptick in convenience fee per order will play an important role in improving adjusted Ebitda of Zomato’s food delivery,” stated the brokerage firm. Elara Securities anticipates an increase in food delivery orders, projecting 830 million orders in FY25E and 940 million orders in FY26E, up from 650 million orders in FY23.
Zomato’s shares were trading at INR 137 apiece on BSE at 12:23 PM on Thursday, compared to INR 134 in the previous close, reflecting ongoing positive momentum in the market.
The foodtech major’s share price witnessed a significant uptrend throughout the previous year, more than doubling in value. Starting the year in the INR 50-60 range, Zomato’s shares concluded the year above INR 120.
Zomato’s recent focus on enhancing profitability has garnered attention, with the company reporting two consecutive profitable quarters. In Q2FY24, Zomato’s profit after tax surged to INR 36 Cr, marking an 18X increase from the preceding quarter.
However, amidst these positive developments, Zomato, along with Swiggy, reportedly received notices for a cumulative goods and services tax (GST) worth approximately INR 1,000 Cr. This GST levy, constituting an 18% tax on the total delivery fees collected, has raised regulatory scrutiny on the food delivery services provided by both platforms.
