Zomato Shares Gains 3%, Delivers 18% Returns In a Month; Should You Buy, Sell or Hold?

Zomato share price jumped nearly 3 per cent on Monday after the food delivery company’s net loss narrowed to Rs 187.60 crore in Q4FY23 from Rs 359.70 crore in the same quarter last year.

The revenue, however, was a tad lower than the estimated Rs 2,122 crore. In FY23, Zomato’s loss narrowed to Rs 971 crore from Rs 1,209 crore a year ago. Revenue increased 69 per cent to Rs 7,079 crore.

Zomato reported a narrowing of losses at Rs 188.20 crore for the March quarter compared with Rs 346.60 crore in the December quarter and Rs 359.70 crore in the same quarter last year. Zomato said its business, excluding quick commerce, turned positive adjusted Ebitda, in the March quarter. It said it is aiming to be positive adjusted Ebitda (and also PAT) including quick commerce within the next four quarters.

“Zomato aims to expand food-delivery EBITDAM to 4-5% of the GOV from the current 1.2%. The superior Q4 performance bolsters our belief in Zomato’s ability to execute & deliver profitable growth. Improvement in consumer sentiment is expected to drive GOV/MTU growth. We maintain BUY on Zomato with a target price of Rs 90 per share,” said analysts at Emkay.

“Zomato has made three senior promotions to CEO/COO roles that moderate our concerns on high attrition at the senior leadership level. We value the business using DCF methodology, assuming a 4% terminal growth rate and 12.5% cost of capital. We maintain our BUY rating with a target of Rs 80,” said analysts at Motilal Oswal.

Nomura India finds the stock worth Rs 45, as it feels achieving high gross order value (GOV) growth and strong contribution margin improvement in core food delivery business remain challenging. Zomato’s relaunch of its Gold membership plan should bring back growth, said Nuvama Institutional Equities while suggesting a target of Rs 94 on the stock. Motilal Oswal Securities sees the stock at Rs 80. It said Zomato’s food delivery performance has been underwhelming in recent quarters, but the company has delivered a strong turnaround in profitability over the period.