Latest Zomato Shares Update

Zomato shares top pick in listed new-age firms; brokerages upgrade target price after Q4 results

Zomato Share

In a month, Zomato shares price rallied nearly 14% on BSE. However, year-to-date, the stock’s gain is slightly over 5.5%.

Today Zomato shares surged sharply on Friday as the stock surged 8 percent during the early trading session on the back of positive news flow over the revision of incentives and discounts at ONDC. The stock is less than 4 percent shy of its issue price at Rs 76. Closed at Rs 71.15 on Friday. according to Business Today

Zomato’s net loss squeezed meaningfully in Q4FY23, as the company’s core business turned profitable. The online food delivery giant is optimistic about becoming a profit-making company by the end of FY24. Brokerages have upgraded their estimates on Zomato and raised their target price on the stock.

In Q4FY23, Zomato’s net loss narrowed by nearly a half to ₹188.2 crores as against ₹359.7 crore a year ago same quarter and ₹346.6 crores in Q3FY23. 

Zomato’s last quarter of FY23 was sweeter with profitability in the food delivery business improving, hypercube continuing on a steady growth, alongside a meaningful reduction in losses of Blinkit business. The icing on the cake was that Zomato remains committed to turning both adjusted EBITDA and PAT positive by Q4 of FY24 on a consolidated basis. This has made brokerages upgrade their growth estimates in Zomato while raising their target prices on this new-age company’s stock.

On Monday, Zomato’s share price closed at ₹63.57 apiece down by 1.50% on BSE.

It needs to be noted that Zomato’s Q4 numbers were a positive ladder for the company in its vision to turn profitable.

During Q4 of FY23, Zomato’s net loss narrowed by nearly a half to ₹188.2 crores as against ₹359.7 crores a year ago same quarter, and ₹346.6 crore in Q3FY23. The losses were squeezed lower due to strong growth in the top-line front. Operating revenue stood at ₹2,056 crore in Q4FY23, rising by 70% from ₹1,211.8 crore in Q4 of the previous fiscal.

Zomato shares performance was primarily driven by the company’s food delivery segment, which delivered an adjusted Ebitda of ₹78 crores in the quarter. Also, the difference between adjusted Ebitda and net profit has narrowed significantly.

Deepinder Goyal, founder and chief executive officer (CEO) of Zomato last week said, in the food delivery business, the company will continue with the same mindset as it looks to expand further the adjusted Ebitda margin (from the current 1.2%) its stated goal of +4-5% of GOV (which would translate to ~ ₹1,000 to ₹1,300 crores of annual cash operating profit at the current scale of the food delivery business).

What do brokerages say about Zomato Shares?

According to ICICI Securities’ note, in Q4FY23, Zomato’s GOV declined QoQ due to adverse seasonality and a muted demand environment. However, according to management in April and May 2023, GOV for the food delivery business grew in the high single digits, which raises hopes of an imminent recovery. Also, the superior execution of cost control has resulted in the Zomato business (ex- Blinkit) turning profitable on an adjusted EBITDA level 2 quarters before guidance.

Further, it explained that Zomato sustained improvement in profitability of the food delivery business and meaningful reduction in losses in the hyperpure and quick commerce businesses.

This in the brokerage’s view has significantly improved the visibility of profitability in the medium term.

In the future, ICICI Securities upgraded its Revenue, EBITDA and PAT estimates on Zomato for FY25E by 21%, 139%, and 100%. It said, “We now think Zomato consolidated (including Blinkit) could turn profitable on an Adjusted EBITDA basis (Rs179mn) as early as FY24E.”

On shares price, ICICI Securities note said, “We maintain BUY rating on Zomato and increase our DCF-based target price to Rs83 from Rs65 led by earnings upgrades, given improved visibility of profitability and sustained improvement in the underlying operating metrics. Risk: Further slowdown in discretionary spending.”

Meanwhile, Zomato is JM Financial’s top pick in the listed Internet space due to its conviction in its long-term growth prospects and the management’s strong execution capabilities.

In its note, JM Financial said, “We continue to remain bullish on the company’s long-term growth prospects in the hyperlocal delivery space as we believe it is well positioned to benefit from robust industry tailwinds such as improving tech penetration and rising income share of digitally native millennials / GenZ. Balance sheet remains strong with net cash of ₹113 billion as of Mar’23.”

Adding JM’s note said, “We continue to value the consolidated business using a 15-year DCF (WACC of 13% and Tg of 6%) to arrive at a Jun’24 FV for Zomato of ₹105 (vs. ₹100 earlier). Implied FY26 PER on our TP works out to ~63x while the stock currently trades at c.39x.”

However, Kotak Institutional Equities analysts in their note said, “We cut food delivery FY2024-25E revenue estimates by 5-11% driven by slow industry growth, ~2% yoy growth in AOV every year and higher CM. Overall, higher profitability broadly offsets the lower revenue growth resulting in an unchanged FV of Rs82, roll-forward to March 2024E notwithstanding.”

How Does Zomato Work?

Zomato has been rapidly growing since 2008 and is one of the most successful startups in India. Even well-established business owners and entrepreneurs are excited to know how it works and how it generates huge profits even after offering attractive discounts. The main work of Zomato is to suggest local and nearby restaurants to users and receive orders from them. Users can place orders from their favorite restaurant based on ratings and reviews shared by previous customers. Perhaps this is why more and more startup owners are interested in developing an app similar to Zomato. It offers comfort to the users and helps business owners reach their local food business to new heights. Zomato’s working flow is simple; let see how, within a few minutes, consumers can enjoy a delicious meal?

Step 1: From the desiccated app solution or website, users can explore various restaurants and order meals.
Step 2: Particular restaurant owners receive an order request and start preparing a meal.
Step 3: Once the food is ready to dispatch, it will be handed over to delivery providers.
Step 4: Delivery providers deliver the meal to the customer’s preferred location.
Step 5: From the given payment options, customers can make payments and share reviews based on their experience. This simplicity encourages food lovers to order food online. If you are already engaged in the food business and want to expand its reach, investing in Zomato like an app will give you a promising return in the long run.

Zomato Business Model

Zomato ensures prompt doorstep delivery that makes food lovers delight. Now, customers no longer need to wait for hours at restaurants. Right now, Zomato is one of the leading online food delivery platforms, which is used in almost 22 countries across the globe. On the other hand, restaurant owners also increase their online visibility by listing themselves on the Zomato app. Let’s discuss in detail how the zomato works.

Customer Segments

Basically, Zomato has three customer segments that contain:
Users: An online platform designed for users to find nearby restaurants and perfect for those people who prefer doorstep delivery.
Local Restaurants: Zomato platform is significant for restaurant owners who want to promote their business in order to grab the target user’s attention.
Delivery Providers: By offering part-time/ full-time services, they can generate a decent revenue source income.

Value Proposition

Zomato is an ultimate online platform that enables users to order food online from an extensive range of options nearby their vicinity. Moreover, if you are new to the food market and want to make an online presence strong, Zomato allows them to promote your food business. Hence, we can say that Zomato fills the gap between restaurant owners and consumers. Once the order gets placed, users can track their orders in real time with an estimated arrival time. With advanced search and filter options, customers can place orders without any hassle. Additionally, Zomato also provides Gold Membership to build a strong customer base and foster loyalty. Zomato’s Gold service comes with additional perks where customers can enjoy heavy discounts on food and beverage orders. You won’t believe it, but the Zomato Gold service alone generated $49 million in 2019.

Key Partners

Uber Taxi

  • Zomato has tied up with an Uber taxi if any customer wants to book a ride to the restaurant to dine out.
  • It means users no longer need to access two apps; they can book a cab and find nearby restaurants altogether.

Other Business Partners: Built an alliance with electronic payment companies like Visa and PayPal.

Key Activities

Zomato’s business model is incomplete without having a look at its core activities. Although, its primary goal is to make restaurant searching easy, and has various key activities such as:1. Managing multiple networks 2. Manage to advertise and sponsored content 3. Enhance customer service 4. Increase brand image

How Does Zomato Make Money? Take A Look At Its Revenue Streams

Zomato has strengthened its presence in the food market at a global level since its inception. Zomato has generated lots of income sources, and certain are listed below, which help you understand in detail how Zomato earns huge profits through its business model and diversification.

Zomato Advertisements

Advertisements are one of the trusted and main sources of income for Zomato as it offers advertising policies to restaurants that want to maximize their profits and customer base. It generates more than 70% of its revenue through this channel. It allows restaurant owners to put their banners on their sites to increase visibility.

Zomato Subscription

With the help of advanced tools and software, Zomato can predict users’ behavior like what they are searching for, what they are not searching for, which dish is trending, which food is in more demand, etc. Restaurant owners need to pay a certain amount to Zomato in exchange for this information. Based on that, they can improve their services and meet customers’ expectations.

Zomato Food Delivery Services

Zomato charges a 20-25% commission from the particular restaurant for each order placed. In some regions, the commission rate may vary from 5-7%.

Zomato Event Organization

In collaboration with certain restaurants, Zomato hosts multiple events such as Christmas Eve, New Year’s Eve, or any other event to boost sales. People have to purchase tickets who want to attend these events.

Zomato Kitchens

This is a kitchen infrastructure service offered by Zomato, where they will work with certain restaurant owners who want to expand their business to more locations at minimum cost. It means entrepreneurs can easily establish their restaurant at the right location with minimum fixed and operating costs.

Wrapping It Up

Zomato’s success story is inspiring to every other entrepreneur who is still new to the food delivery market. The workflow of Zomato and its business model is perfect for those who want to capture the market in its early stage. It saves the user’s time and offers comfort at each level-from online ordering to payment to doorstep delivery. For your business idea, our mobile app development services are therewith to leverage the best results integrating all your requirements.

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