Zomato Share Price Surges 4% after Strong Q3 Results

Zomato's stock price surged over 4% in early trading on Friday, reaching a new high for the past year. This jump came after the company announced strong financial results for the quarter ending December 2023 mainly driven by growth in its food delivery services. Zomato shares climbed by 4.34% to reach ₹150.25 each on the Bombay Stock Exchange (BSE).

Financial Results

Zomato reported a net profit of ₹138 crore in Q3 FY24, a turnaround from a loss of ₹347 crore in the same period last year. This remarkable growth amounted to a staggering 283% increase in net profit on a quarter-on-quarter basis. The company's revenue from operations also witnessed a robust uptick reaching ₹3,288 crore in Q3FY24 marking 69% growth compared to ₹1,948 cr previous year.

Total value of all orders placed for food delivery known as gross order value (GOV) increased by 25% compared to last year the company anticipates this growth trend to persist at a rate of over 20%YoY. Moreover there's potential for even faster growth if the company gains more market share than expected and if there's a rebound in overall consumer demand.

Analyst Commentary

Jefferies, a foreign brokerage firm, described Zomato’s performance in Q3FY24 as strong, especially in the food delivery sector. They noted smart margin gains and considered the growth impressive, although they believed it could have been even better given weaknesses in other consumption categories. Jefferies adjusted their EBITDA estimates upwards by 4-10%. They anticipate a steady improvement in unit economics as Zomato scales up, benefiting from cost efficiencies, and as customers become more willing to pay for convenience. Jefferies maintains a positive outlook on Zomato, giving it a 'Buy' rating and raising the target price to ₹205 per share from ₹190.

Several other brokerage firms joined Jefferies' optimism with HSBC, Nomura, Motilal Oswal Financial Services and BofA Securities all maintaining or upgrading their ratings on Zomato's stock. HSBC for instance raised its target price to ₹163 per share, citing expectations of a gradual market recovery. Nomura upgraded its rating from 'reduce' to 'add' and increased the target price to ₹180 per share further bolstering investor confidence.

Zomato's impressive performance has garnered attention beyond domestic markets, with international institutions such as Morgan Stanley maintaining an 'overweight' rating and raising the target price to ₹150 per share from ₹140. The company's ambitious growth projections especially with its subsidiary Blinkit have set the stage for continued expansion with medium term growth expectations hovering around 50% YoY

Final Words

Zomato's stock rose 172.52% in the last 12 months. Zomato's revenue surged 69% year-on-year to Rs 3,288 crore, despite challenges in the e-commerce sector due to high inflation and muted demand. The growth was driven by positive impacts from the Cricket World Cup and festive season. Analysts remain bullish on the stock, citing robust financials and promising growth prospects. With the company poised for further expansion and market consolidation, Zomato continues to assert its dominance in the online food delivery space.