Zomato, now renamed as Eternal, has once again grabbed the spotlight, not just for its food delivery business but also for the exceptional performance of its quick commerce arm, Blinkit.
The brokerage firm Anand Rathi has maintained a ‘Buy’ rating on the stock, even while trimming its target price to Rs 300. As per the brokerage report, the company’s long-term growth plans and strategic execution, especially in the face of fierce competition is one of the key things to note.
Blinkit continues to exceed expectations
Zomato’s quick commerce business, Blinkit, continues to exceed expectations. The brokerage in its report noted that in the Q4, the Gross Order Value (GOV) grew by 20.8% quarter-on-quarter and a staggering 134% year-on-year. In the last two quarters alone, Blinkit has added nearly 40% of its current 1,301 dark stores, with 294 new stores going live.
“We believe losses have peaked and should taper ahead,” the brokerage said.
Food delivery slows, but no alarms
While Blinkit soared, Zomato’s traditional food delivery business had a more subdued quarter. GOV in this segment dipped by 1.4% quarter-on-quarter but was still up 16% year-on-year. The brokerage in its report noted the soft numbers to several temporary issues such as a sluggish demand environment, a delivery partner shortage, and the delisting of about 19,000 restaurant partners.
Interestingly, February also had one fewer day, which impacted volumes. “Adjusting for this, NOV growth could have been higher by ~200bps compared to -3% q/q,” the report noted.
Farewell to ‘Zomato Quick’ and ‘Everyday’
In addition to this, Zomato has decided to shut down its 10-minute delivery vertical “Zomato Quick” and the “Everyday” home-style meal service. According to the brokerage, these moves come amid limited customer demand and lack of profitability. However, the company’s long-term guidance of 20% year-on-year growth in the FD segment remains unchanged, suggesting management is confident about core business strength.
“Despite high competition, the company has maintained its market share over the last few quarters,” the report said.
Growth projections and valuation
The brokerage expects overall GOV and revenue to grow at 42.8% and 44.9% CAGR, respectively, between FY25 and FY27. Segment-wise, it sees GOV contributions from FD, QC (quick commerce), and GO (Hyperpure) at 15.7%, 73.8%, and 40%, respectively. Revenue growth in these segments is also projected to be strong, further improving Zomato’s take-rate from 18.8% in FY25 to 19% in FY27.
While adjusted EBITDA loss widened in Q4 to Rs 1,780 crore, it was lower than Street expectations. The brokerage said, “We cut our FY26e/27e EBITDA by ~37.6%/~14% and maintain our Buy rating.”