Zomato hits over 1-year high on extended buying; up 101% from 52-week low

The stock hit a 15-month high of Rs 86.37, gaining nearly 2 per cent on the BSE in Friday's intra-day trade

Shares of Zomato hit 15-month high of Rs 86.37, gaining nearly 2 per cent on the BSE in Friday's intra-day trade, in an otherwise weak market. The stock price of the food delivery platform company was quoting higher for sixth straight trading day, surging 11 per cent during the period. By comparison, the S&P BSE Sensex was down 0.52 per cent at 65,922 at 12:21 PM.

Zomato was trading at its highest level since April 2022. The stock has more-than-doubled, bouncing back 101 per cent from its record low level of Rs 40.55, touched on July 27, 2022. It had hit a record high of Rs 169 on November 16, 2021.

The meeting of the board of directors of Zomato is scheduled to be held on Thursday, August 3, 2023, to consider and approve the unaudited financial results of the company for the quarter ended June 30, 2023 (Q1FY24).

Since May 19, the stock price of Zomato has appreciated 36 per cent after the company reported better-than-expected operating performance in the March quarter (Q4FY23). While it registered muted gross order value (GOV) growth quarter-on-quarter (QoQ), contribution margin across segments beat estimates.

The company had reported narrowing of losses both on a year-on-year (YoY) and sequential basis in the March quarter (Q4FY23). The food aggregator's consolidated loss narrowed to Rs 187.6 crore in Q4FY23 from Rs 346.6 crore in the December quarter (Q3FY23), and Rs 359.7 crore in the corresponding quarter last fiscal (Q4FY22).

Zomato's earnings before interest, taxes, depreciation, and amortisation (Ebitda) loss narrowed to Rs 175 crore in Q4 from Rs 265 crore in Q3. Excluding its quick commerce, however, the food aggregator turned adjusted Ebitda positive in the March quarter.

Management expects sequential GOV growth to be in a high single digit in Q1FY24 on the back of green shoots of recovery since February 2023.

Management has also guided for positive adjusted Ebitda and net profit on a consolidated basis (including quick commerce firm Blinkit) within the next four quarters, and plans to achieve this via: profit growth in the food delivery business; loss reduction in Blinkit. It aims to expand fooddelivery EBITDAM to 4-5 per cent of the GOV from the current 1.2 per cent, analysts at Emkay Global Financial Services had said in Q4 result update.

The superior Q4 performance bolsters our belief in Zomato’s ability to execute and deliver profitable growth. Improvement in consumer sentiment is expected to drive GOV/MTU growth, the brokerage firm said. It has a 'Buy' rating on Zomato with a target price of Rs 90 per share.