Zomato Share Price Rises as Jefferies Supports Investment with Growth Outlook

Zomato Stock Analysis: Growth Catalysts from Jefferies

Zomato shares were trading marginally higher as Jefferies maintained a 'buy' rating on the stock and set a base case target of Rs 335, indicating a potential upside of 29 percent from the previous close. The firm emphasized several intriguing initiatives in Zomato's food delivery segment expected to bolster the company's market position.

Zomato’s Digital Commerce Expansion

• Zomato is riding the wave of the growing food services industry in India.
• With around 20 million monthly transacting users, Zomato has ample room for increased customer acquisition and revenue growth.
• Blinkit is positioned as the market leader in the fast-growing quick commerce sector.

Jefferies anticipates a compound annual growth rate (CAGR) of approximately 20 percent in delivery revenue from FY24 to FY27. As Zomato scales its operations, improvements in unit economics are expected through cost efficiencies.

Zomato's Financial Outlook

Jefferies values Zomato's delivery segment at 55 times its two-year forward adjusted EBITDA and quick commerce at 12 times its two-year forward sales. In a bullish scenario, a target price of Rs 360 suggests a 40 percent upside, while a downside target of Rs 200 is also noted.

Catalysts and Risks

1. Positive Factors: Favorable macroeconomic conditions, increased discretionary spending, rapid digital commerce adoption, and better than expected trends in average order values.
2. Potential Downsides: Heightened competition, slower market growth, and adverse regulatory changes.

Zomato shares closed at Rs 259.85 on the National Stock Exchange (NSE) and have surged 108 percent this year, significantly outperforming Nifty's 16 percent returns.

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