Zomato hits 21-month high on strong Q2 results; zooms 139% since April

The stock has rallied 13 per cent in tpast two trading days after the company reported its second consecutive quarter of consolidated net profit

Shares of Zomato hit a 21-month high of Rs 121.95 as they rallied 5 per cent on the BSE Monday's intraday trade after the company reported its second consecutive quarter of consolidated net profit.

The food delivery platform clocked profit after tax of Rs 36 crore during the second quarter of financial year 2023-24 (Q2FY24), up from Rs 2 crore in the previous quarter (Q1FY24). The new-age company had reported a net loss of Rs 251 crore during the corresponding period last year (Q2FY23).

The stock has rallied 13 per cent in the past two trading days. It was quoting at its highest level since January 2022. At 09:35 AM, Zomato was up 3 per cent at Rs 119.90, as compared to 0.56 per cent gain in the S&P BSE Sensex. Thus far in the financial year 2023-24 (FY24), the market price of Zomato has more-than-doubled, zooming139 per cent.

A sharp rally in the stock price has seen the company regain market capitalisation of Rs 1 trillion. Currently, Zomato has a market capitalisation of Rs 1.03 trillion, BSE data shows.

Meanwhile, Zomato's revenue from operations rose 71 per cent year-on-year (Y-o-Y) to Rs 2,848 crore in Q2FY24 from Rs 1,661 crore a year ago. It had reported revenue of Rs 2,416 crore during the previous quarter.

The revenue growth was led by Blinkit, up 31.5 per cent quarter-on-quarter (Q-o-Q). The food delivery business also outperformed with revenue growth of 12.7 per cent Q-o-Q on the back of strong order volume.

The growth drivers for the company include the money it was charging for every delivery and uptick in the adoption of its loyalty programme. According to the company's statement to its shareholders, a key driver of gross order value (GOV) growth in the quarter was the growing adoption of its Gold program. It, now, has 3.8 million members (at the end of Q2FY24) and contributes 40 per cent of GOV in the food delivery business.

However, the management said festive period in October to December (Q3FY24) is usually a mixed bag for the food delivery business. A lot of Indians also observe fasts during the Navratri festival and Shradh period (both of which are in Q3FY24 this year due to a late Diwali), which tend to dampen order volumes during the quarter. The Cricket World Cup, on the other hand, should result in additional order volumes, but we think that the demand uptick would be limited to a handful of match days and hence, not very significant, the management said.

"The food delivery business is still in a nascent stage in India with a long runway for growth. With a dominant market share and strong growth in the food delivery business and Hyperpure, we expect Zomato to report a strong 53 per cent adjusted revenue CAGR over FY23-25," Motilal Oswal Financial Services said in result update.

The brokerage firm now estimates Zomato to turn positive on reported Ebitda by Q3FY24 (from earlier expectation of Q4FY24) and deliver 4.1 per cent Ebitda margin in FY25.