Zomato gains after domestic broker maintains 'buy' rating

Zomato rose 1.12% to Rs 58.85 after a domestic brokerage reportedly kept its 'buy' rating on the stock with a reduced price target of Rs 85 per share.

According to the media reports, the domestic brokerage has cut Zomato's target price to Rs 85 from Rs 100 earlier, as its conversations with industry participants indicated that food delivery gross merchandise value (GMV) growth may remain subdued in the near-term, owing to weak demand.

The target, however, is still at 46% premium to over Monday's closing price of Rs 58.20.

The domestic brokerage is baking in slower food delivery GMV growth forecasts of 26-22% over FY23-25 as against 32-30% earlier.

The brokerage said it liked Zomato's comfortable market share position in a duopolistic market. It believed that delivery market has legs to grow, not withstanding near-term slowdown.

Zomato connects customers, restaurant partners and delivery partners. Customers use Zomato to search and discover restaurants, read and write customer generated reviews and view and upload photos, order food delivery, book a table and make payments while dining-out at restaurants. On the other hand, it provides restaurant partners with industry-specific marketing tools which enable them to engage and acquire customers to grow their business while also providing a reliable and efficient last mile delivery service. The company also operates a one-stop procurement solution, Hyperpure, which supplies high quality ingredients and kitchen products to restaurant partners.

The online food delivery platform reported a consolidated net loss of Rs 250.80 crore in Q2 September 2022, as against net loss of Rs 429.60 crore in Q2 September 2021. Revenue from operations stood at Rs 1661.30 crore in Q2 September 2022, up 62.2% from Rs 1024.20 crore reported in Q2 September 2021.

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