Zomato, whose shares have risen 62 per cent since July low, could report narrowing of losses in September quarter on both sequential and year-on-year basis. Higher contribution margin of the food delivery business and better revenue mix due to advertising business should drive a sequential reduction in Ebitda loss, said analysts, who see up to 91 per cent potential upside on Zomato shares.
Investors would watch for any commentary on orders and GOV (gross order value) growth, Blinkit’s unit economics and synergies from the user base; and delivery fleet of Zomato and Blinkit, analysts said.
Kotak Institutional Equities expects Zomato to post a loss of Rs 149.20 crore in September quarter compared with a loss of Rs 185.70 crore in June and a loss of Rs 435.10 crore in the year-ago quarter. It expects sales for the online food aggregator to surge 48.2 per cent YoY to Rs 1,517.90 crore from Rs 1,024.20 crore in the year-ago quarter.
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Kotak is building in a 7 per cent sequential revenue growth on account of higher food delivery orders, higher take rates and recovery in advertising business for the standalone business (ex-Blinkit).
Zomato stock has risen 62 per cent over its 52-week low of Rs 40.55 on July 27. Despite this, the scrip is down 61 per cent from its 52-week high level, owing to dual impact of correction in technology stocks globally and concerns around the Blinkit acquisition, Edelweiss Securities said in a note.
Zomato completed the acquisition of Blinkit in August, and Edelweiss said it would be crucial for Zomato to capture synergies from delivery fleet integration. This brokerage sees core loss at Rs 165.20 crore. It sees the quarterly revenue at Rs 1,538, up 50 per cent.
“We estimate 8.8 per cent QoQ revenue growth on the back of 6.5 per cent QoQ GOV growth. We are building in 6.5 per cent QoQ order growth, flat AOV and 8 lakh addition in monthly transacting users. We anticipate contribution margin as a percentage of GOV to expand marginally from 2.8 per cent in Q1FY23 to 3.2 per cent. This is on account of better take rate and reduced delivery and discount spends,” Edelweiss said.
AOV stands for average order value.
JM Financial sees Zomato’s losses at Rs 151.40 crore. This brokerage expects the company to report improvement in profitability with adjusted Ebitda loss narrowing 210 basis points sequentially and 21.8 percentage points YoY. Contribution margin is likely to improve to 3.1 per cent against 2.8 per cent in June quarter, it said.
Batlivala & Karani Securities pegs Zomato’s Q2 loss at Rs 106.10 crore. It sees revenues soaring 55.1 per cent YoY to Rs 1,588 crore.
Analyst targets
JM Financial finds Zomato Rs 125-worth; Kotak sees Zomato’s fair value at Rs 90. Edelweiss values Zomato at Rs 80. ICICIdirect, which initiated coverage on this stock on September 28, sees it at Rs 90. The target does not factor in any value accretion from Blinkit, considering uncertain timelines on unit economics turnaround and intense competitive intensity. Emkay also values the stock at Rs 90. Batlivala & Karani Securities has a ‘hold’ rating on the stock. The targets suggest up to 91 per cent upside over Tuesday’s closing price of Rs 65.60 on BSE.
