Zomato to zoom another 35%? CLSA raises target amid platform fee hike

After a stupendous 2023, Zomato shares are poised to add further to investors’ wealth, if the estimates of a top global brokerage are to go by.

From January 1, 2024, Zomato has increased its platform fee by 33 per cent to Rs 4 in key markets, according to Zee Business research. The food delivery firm charged a fee to the tune of Rs 9 in some of the regions on New Year's Eve, according to the research.

The latest increase comes on the back of an increase in the platform fee to Rs 2 in August. 

What CLSA says

The brokerage maintained its 'buy' rating on Zomato after the latest hike in the fee by the food delivery firm. Its target for the stock, which has already showered investors with a return of 110 per cent in one year, stands at Rs 168, which implies a further upside of 35 per cent from the previous close. 

According to CLSA, the platform fee increase by the company would partially (about 25 per cent of the impact) offset the impact of GST on its delivery charge. 

In case Zomato is liable to pay GST on delivery charges it collects, Zomato may use a combination of an increase in commission rates, higher average order value (AOV) through an increase in menu prices or higher platform fees to pass on the GST to the consumer, the brokerage added. 

Last month, Zomato company received a tax liability notice worth Rs 402 crore. The food delivery company has maintained that even though it had collected delivery charges from October 29, 2019 to March 31, 2022, it is not liable to pay tax, and that it will file an appropriate response to the notice.

Orders galore on New Year's Eve

Meanwhile, Zomato’s chief executive took to microblogging site X (formerly Twitter) to state that the company had logged a new feat by surpassing the total number of orders it clocked in the New Year ever over the last six years.

Hit our all-time high orders in a day on @zomato. Immense gratitude to all 
Really thankful to all our delivery partners and restaurant partners who made this possible

— Deepinder Goyal (@deepigoyal) December 31, 2023

According to stock research portal Trendlyne, out of the 27 analysts covering Zomato, 20 have given a ‘strong buy’ rating on the stock while others have a 'buy' call.

The average one-year target of the 27 analysts stands at Rs 130, suggesting a 3 per cent upside.

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