New Delhi, 29th July 2023: Zomato, the popular online food delivery company, experienced a remarkable surge in its share price, reaching a 15-month high of Rs 86.37 during Friday’s intra-day trade. This impressive gain of nearly 2 per cent on the BSE marked the sixth consecutive day of positive trading for the company, with an overall rise of about 11 per cent over this period.
The surge in Zomato’s shares comes amid a volatile stock market scenario. As of 2 pm, the share price of Zomato continued to rise, trading at Rs 86.69, representing a 2.08 per cent increase on the BSE. In contrast, the benchmark Sensex witnessed a decline of approximately 0.41 per cent, standing at Rs 65,992.48.
Notably, Zomato’s shares had last achieved this price level in April 2022. Over the past year, the company’s stock has showcased remarkable growth, surging by nearly 90 per cent from its previous levels. The stock has risen by almost 101 per cent since it hit its one-year low of Rs 40.55.
It’s interesting to highlight that Zomato’s all-time high was recorded at Rs 169 on 16th November 2021. However, the stock has not yet reached this peak again.
Looking ahead, Zomato’s board of directors is scheduled to meet on Thursday, August 3, 2023, to review and approve the unaudited financial results of the company for the quarter ended June 30, 2023 (Q1FY24).
One of the key drivers behind the recent appreciation of Zomato’s stock price is its better-than-expected operating performance in the March quarter (Q4FY23), which was reported on May 19. Despite a subdued gross order value (GOV) growth quarter-on-quarter (QoQ), the contribution margin across segments exceeded expectations, instilling positive market sentiment.
During Q4FY23, Zomato successfully reduced its losses both on a year-on-year (YoY) and a sequential basis. The company’s consolidated loss decreased to Rs 187.6 crore in Q4FY23 from Rs 346.6 crore in Q3FY23 and Rs 359.7 crore in the same quarter of the previous fiscal year (Q4FY22). Moreover, the Earnings before Interest, Taxes, Depreciation, and Amortisation (EBITDA) loss narrowed to Rs 175 crore in Q4 from Rs 265 crore in Q3. Remarkably, excluding its quick commerce operations, the food aggregator achieved a positive adjusted EBITDA status in the March quarter.
The management of Zomato has expressed optimism about a high single-digit sequential GOV growth in Q1FY24, attributing it to the green shoots of recovery observed since February 2023.
Additionally, Zomato’s management has set ambitious goals for the future. Their plan entails achieving positive adjusted EBITDA and net profit on a consolidated basis (including the quick commerce firm Blinkit) within the next four quarters. To attain this, they will focus on profit growth in the food delivery business and reducing losses in Blinkit. Emkay Global Financial Services analysts have highlighted this strategy and projected an expansion of food delivery EBITDA to 4-5 per cent of GOV from the current 1.2 per cent.
Based on the company’s stellar Q4 performance, the brokerage firm has expressed confidence in Zomato’s ability to execute and deliver profitable growth. The anticipated improvement in consumer sentiment is expected to drive GOV/MTU growth, further supporting their positive outlook. Emkay Global Financial Services has recommended a ‘Buy’ rating on Zomato with a target price of Rs 90 per share.
