Zomato to show muted business, stock performance this year, says HSBC; target raised

Brokerage HSBC has said it does not expect Zomato to repeat its 2023 performance in 2024, after the food delivery company has emerged profitable for two back-to-back quarters up to September 2023 and registered improvement in its EBITDA margin for four quarters. While retaining its ‘buy’ rating on Zomato, the foreign brokerage has raised its target for the stock by Rs 10 to Rs 150 per share.  

Yet, the stock gained by as much as Rs 3.3, or 2.5 per cent, to a 52-week high of Rs 138 apiece on BSE.  

HSBC’s target implies an upside of 11.4 per cent from the previous close of Rs 134.7 apiece. 

How HSBC views Zomato?

According to the brokerage, Zomato is expected to stage a relatively muted business and stock performance in 2024 following the extremely strong 2023. However, the brokerage remains constructive on Zomato from a long-term perspective. Its view is highly dependent on the continued progression of the food delivery company’s quick commerce (QC) business.  

Also, the brokerage is of the view that Q3 and Q4 are unlikely to drive a major earnings upgrade for Zomato. 

What other brokerages make of Zomato?

Macquarie has, on the other hand, maintained its ‘underperform’ call on the new age stock with a target of Rs 76 apiece. 

Earlier, CLSA upgraded Zomato to ‘buy’ from ‘outperform’ with a target of Rs 168 per share after the company staged a good performance for the September quarter. 

Zomato Q2 results  

Zomato posted a net profit of Rs 36 crore for the September quarter, driven by higher food delivery orders, as against a net loss of Rs 251 crore for the corresponding period a year ago.  

Its gross order value (GOV)—the total value of all food delivery orders placed—for the foods business grew 20 per cent, led by higher orders and as customers with the paid ‘gold’ subscription used the service more frequently. 

With inputs from agencies