Zomato shares clock 52-week high after 2nd profitable quarter; CLSA sees 56% upside

Zomato share price NSE, Zomato share price target, Zomato Q2 results: Zomato shares rallied over six per cent to clock a fresh 52-week high of Rs 123.9 apiece on the NSE on Monday, November 6, after CLSA upgraded the food aggregator and delivery company to to buy from outperform. The global brokerage upgraded the stock after Zomato posted an encouraging set of numbers for the quarter ended September (Q2 FY24).

The company posted a profit for the second quarter in a row on the back of strong revenue growth. The stock's previous 52-week high level was Rs 119.9 clocked in Friday's session.

Zomato reported Rs 36 crore as net profit during the July–September quarter, as against Rs 251 crore loss incurred in the same quarter last year. The results were announced during market hours on Friday, November 3.

Zomato shares finished 5.97 per cent higher at Rs 123.45, thereby continuing the winning streak for the third session on the NSE. In addition, a block deal of Rs. 1.38 crore shares (0.16 per cent equity shares) took place in Zomato, as per the Zee Business report.

Here's how the counter moved on Monday, November 6: 

Source: NSE

CLSA has raised the target to Rs 168 from Rs 120, translating to an upside of over 56 per cent from Friday's close. "Zomato reported sales and PAT of -1 per cent and/+8 per cent versus Bloomberg consensus, with 20 per cent YoY gross order value (GOV) growth in food delivery and 86 per cent in quick commerce," the brokerage's note added.

In its results review note', CLSA said that the acceleration in gross order value (GOV) was primarily driven by an increase in monthly transacting customers (MTC). Further, higher use frequency, too, drove improved contribution. With greater confidence in profitability, especially for Blinkit, the brokerage upgraded the rating.

Revenue from operations was Rs 2,848 crore for the quarter. In the year-ago period, the figure stood at Rs 1,661 crore. Total expenses were Rs 3,039 crore during the quarter under review. In the year-ago quarter, it stood at Rs 2,092 crore, according to a regulatory filing.

"The growth momentum we witnessed in Q1 FY24 continued in Q2 FY24, driven by healthy growth across all our businesses," founder and CEO Deepinder Goyal said.

"On the profitability front, we posted a second consecutive profitable quarter with adjusted EBITDA of Rs 41 crore as compared to Rs 12 crore profit in the previous quarter (Q1 FY24) and a loss of Rs 192 crore last year same quarter (Q2 FY23)," Goyal added.

Zomato share price target: Here's what other brokerages make of the Q2 nos

Jefferies has maintained a buy stance on the counter. It has raised the target to Rs 165 from Rs 130. Highlighting that Zomato always delivers more than expected, the brokerage said in its report, "Another comprehensive beat drives meaningful upgrades on both the top-line as well as bottom-line."

"Stable EBITDA margins in food delivery may disappoint some. GOV growth acceleration addresses a key investor concern around MTU and frequency," the brokerage added.

"Management will likely prioritise growth vs. margin, quarter to quarter. Quick Commerce (Q/C) remains impressive on growth, with EBITDA break-even in sight," the brokerage further said.

HSBC has also continued with a buy call and has raised the target to Rs 140 from Rs 120. "Guidance for Q3 is strong as well, with high single-digit growth for FD and continued traction for quick commerce," the brokerage said. HSBC remains positive on Zomato's long-term prospects, especially quick commerce.

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