Zomato Q1 losses widen: Brokerages give mixed stance, see downside of up to 40% - check details here

Even as the first-quarter losses of Zomato have widened during the previous quarter, majority of the brokerages are still bullish on the company albeit some concern. They see a downside in stock price going forward.

As per Zomato’s filing to exchanges, the company’s net loss widened to Rs 356 crore in the June-ended quarter of the financial year 2021-22, as against Rs 99.8 crore in the same period a year ago. 

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However, the total income of the company grew at least three-fold to Rs 916 crore in the Q1 of FY22, as compared to Rs 283.5 crore it reported in the year-ago period.

This is the first quarterly earnings results announced by Zomato since its listing. The adjusted EBITDA loss of Rs 170 crore was on expected lines, brokerage firm Jefferies said. The brokerage raised FY22-24 revenue expectations by 10-20 per cent, while maintaining a Buy stance with a target of Rs 175 per share.

Another brokerage company Dolat Capital had initiated coverage with a Sell rating and DCF based target of Rs 90 per share, the downside of 40 per cent just ahead of its Q1 earnings announcement.

The brokerage believes that Zomato with its wide offering, deeper reach and untapped opportunity can drive revenue CAGR of 33 percent over FY21-FY30E, but in its conquest for complete ecosystem approach that, too, at a pan-India level would mean the profitability would have to wait for much longer than what the market anticipates.

Similarly, even HSBC has initiated its coverage of Zomato with a ‘reduce’ rating, with a target price of Rs 112 per share, implying a 14 per cent downside potential. HSBC added that the long-term opportunity for the food delivery sector is real and investors may  have  to show patience in the near term. 

The stock on Tuesday declined by over 4 per cent ahead of its Q1 results to close at Rs 125 a share. The stock so far has surged over 70 per cent since from its issue price. Zomato was listed on July 23, 2021, with at least 60 per cent higher premium and had touched a market cap of Rs 1 lakh crore.