Competitive challenges likely to keep Eternal stock under pressure

Eternal reported Q3 FY26 net revenue of Rs 16,300 crore, up 20.7 per cent quarter on quarter and ahead of consensus estimates

The Q3FY26 results from Eternal contained two major surprises. One is that Blinkit has achieved adjusted breakeven at the operating profit level a couple of quarters ahead of schedule. The second is Deepinder Goyal moving up the ladder to vice-chairman with Albinder Dhindsa taking over as CEO. However, in the near-term, Dhindsa will stay focused on Blinkit, while Goyal will continue to be involved in strategy, culture, leadership development, etc. The CEO transition seems to be gradual. The division of responsibility will evolve, but daily execution may continue as normal.

 

Eternal reported Q3FY26 net revenue of ₹16,300 crore, up 20.7 per cent Q-o-Q and ahead of consensus estimates. Food delivery (FD) net order value (NOV) was ₹9,840 crore. Blinkit NOV was ₹13,300 crore (up 120 per cent Y-o-Y). In FD, adjusted operating profit as a per cent of NOV was up 10 basis points Q-o-Q at 5.4 per cent. Blinkit reported a contribution margin of 5.5 per cent (4.6 per cent in Q2FY26). Adjusted operating profit margin hit breakeven. 

The reported Ebitda was ₹364 crore (2.3 per cent reported operating profit margin up from 1.8 per cent in Q2). The net profit stood at ₹102 crore, up 72 per cent Y-o-Y. Absolute adjusted operating profit was ₹531 crore, up from ₹503 crore in Q2FY26 and ₹4.23 crore in Q3FY25.

 

Eternal continues to be the market leader in both FD and quick commerce (qcom) and the Blinkit result is a surprise because competitive intensity in qcom is high and likely to accelerate further. Hence maintaining qcom margins may be difficult and a key monitorable. Analysts have also noted that Eternal is no longer reporting gross order value and has moved to NOV, which makes it hard to assess the extent of discounting.

 

In other businesses, Hyperpure has also turned positive at adjusted operating profit level. Management is calling for targets of $1 billion in revenue with 4-5 per cent margins sometime over the next three years, by helping restaurants run leaner and improving sourcing. Management expects net losses to narrow sequentially, with net breakeven over next four quarters. Eternal could reach a positive net profit margin of 1.6 per cent by Q4FY27.

 

FD NOV grew 16.6 per cent Y-o-Y, alongside strong monthly transacting customer (MTC) additions during the quarter. The FD revenue grew 8 per cent Q-o-Q and 29 per cent Y-o-Y and contribution margin was flat at 10.4 per cent. Management guided for growth to trend toward 20 per cent Y-o-Y, given likely market share gains.

 

The FD Y-o-Y growth is guided to trend to 20 per cent. Growth is driven by a small improvement in the demand environment, leading to higher app engagement and higher order volume. A reduction in minimum order value for free delivery on gold orders to ₹99 from ₹199, increased ordering frequency. There was 21 per cent Y-o-Y growth in average MTC which rose to 24.9 million versus 20.5 million in Q3FY25 and 24.1 million in Q2FY26.

 

On Blinkit, management says the ceiling of the qcom market is not yet visible with even mature geographies like Delhi-NCR growing at 55 per cent Y-o-Y. The guidance of 3,000 stores by March 2027 assumes Blinkit will face continued competitive intensity. If competition moderates, the company would aim for 3,500-4,000 stores by March 2027, for NOV growth of over 100 per cent Y-o-Y.

 

Competitive intensity increased during the last quarter as competitors went to zero minimum order values and zero delivery fees, alongside increased discounting. Blinkit opted for profitability over growth, given just 9.3 per cent Q-o-Q growth in order volume. Blinkit added 211 net new stores taking total store count of 2,027, about 70 stores short of guidance of 2,100. Capex per store will rise due to warehousing expansion, increased automation and larger store sizes. Net working capital is expected to stay below 18 days, with return on capital employed above 40 per cent.

 

Eternal’s results do imply that the market leader could be profitable at scale despite intense competition. But competitive intensity is still increasing in qcom, which means Eternal must focus on market share and margins will be hard to sustain.