Eternal shares bounce 9% from day's low post Q4 show; is the worst over?

Eternal share price: Shares of Eternal recouped morning losses after most analysts maintained their 'Buy' rating on the stock

Food delivery and quick commerce (qcom) company Eternal, formerly known as Zomato, staged a sharp intraday recovery in its share price on Friday. From a low of ₹220.1 per share, Eternal stock price bounced back 8.8 per cent to hit a high of ₹239.5.  The stock finally ended the day at ₹234, with gains of 0.8 per cent. 

Shares of Eternal recouped trading losses after most analysts maintained their “buy” rating on the stock as the Deepinder 

Goyal-led company reported its financial results for the fourth quarter (January-March) of 2024-25 (Q4FY25). 

Though they believe Eternal’s profitability could stay under pressure in the near term as the company is focused on capturing better market share, especially in the face of heightened competition, and prioritising growth over earnings, the worst could be behind the company after the April-June quarter of the current financial year (Q1FY26). This, they said, puts the company on a long-term growth runway. 

Analysts at JM Financial suggest that investors use any dip in the stock, due to the management's cautious tone amid rise in competitive pressures over the near term, to build sizeable position in Eternal. It expects Blinkit to materially slow down expansion of warehousing capacity and dark stores from Q2FY26 onwards, which should lead to meaningful operating leverage benefit and likely peaking-out of its losses in Q1FY26. Further upside to margins can come as and when the business starts to move to an inventory-led model, it added. The brokerage has a “Buy” rating with a target price of ₹280. 

However, analysts at Motilal Oswal Financial Services have cut their earnings estimates for FY26/27 by about 52 per cent/27 per cent, driven by uncertainty arising from intense competition in the qcom business and the accelerated expansion of the dark store network. The brokerage expects adjusted Ebitda (earnings before interest, taxes, depreciation and amortisation) to likely remain under pressure through FY26 as the company defends its market share and expands in the space. It has pushed back its profitability assumptions further, expecting Blinkit to just break even only in FY27. The brokerage has a “buy” rating, with a target price of ₹260. 

During Q4FY25, Eternal repo­rted an 8 per cent quarter-on-quarter (Q-o-Q) and 63.8 per cent year-on-year (Y-o-Y) rise in revenue at ₹5,833 crore. Segment-wise, Blinkit’s gross order value (GOV) increased 20 per cent Q-o-Q/134 per cent Y-o-Y while the food delivery business’ GOV climbed 16 per cent Y-o-Y/down 1.4 per cent Q-o-Q. Hyperpure revenue grew 10.1 per cent Q-o-Q/93.5 per cent Y-o-Y to ₹1,840 crore, and going-out GOV/ revenue grew 104 per cent/146 per cent Y-o-Y on a reported basis. 

On the margin front, food delivery segment's contribution rose to 8.6 per cent from 8.5 per cent in Q3FY25, whereas adjusted Ebitda margin as percentage of GOV improved 10 basis points (bps) Q-o-Q to 4.4 per cent. 

Further, while Blinkit’s contribution margin improved 10 bps Q-o-Q to 3.1 per cent in Q4FY25, its adjusted Ebitda margin (as percentage of GOV) fell 60 bps Q-o-Q to -1.9 per cent, hit by higher marketing investments aimed at accelerating new customer acquisition. 

Overall, consolidated adjusted Ebitda fell 42.1 per cent Q-o-Q and 14.9 per cent Y-o-Y to ₹170 crore, adjusted Ebitda margin (as a percentage of adjusted revenue) contracted to 2.7 per cent (down 229 bps Q-o-Q/234 bps Y-o-Y), and net profit fell 77.71 per cent Y-o-Y to ₹39 crore. 

Nuvama Institutional Equities said Blinkit’s lower-than-expected losses came in despite an accelerated pace of dark store additions in Q4FY25. The segment’s contribution margin also improved, even with dilution from newly opened dark stores. With the store expansion cycle likely peaking, the brokerage expects adjusted Ebitda losses to decline from the next quarter. The brokerage has a “Buy” rating, with a target price of ₹290. 

ICICI Securities indicated that Eternal posted better-than-exp­ected adjusted Ebitda profitability in Q4FY25 on the back of contained qcom losses despite adding 294 dark stores and 1 million square feet (msf) of warehousing space. More­over, this was possible in a quarter, with a seasonally lower average order value (down 5.9 per cent Q-o-Q), due to better mix, limiting exp­ansion to new cities, and sustained improvement in ad revenues.

 

While the management has cautioned about rising competition from non-qcom channels, the brokerage believes qcom margin will likely improve from Q1FY26. The brokerage has a target price of ₹310.