Zomato surges 8% on heavy volumes after 13% fall from record high in Aug

The average trading volumes on the counter jumped over two-fold, with a combined 83.99 million equity shares changing hands on the NSE and BSE till 10:40 AM.

Shares of food delivery platform Zomato surged 8 per cent to Rs 261.50 on the BSE in Thursday’s intra-day trade amid heavy volumes in an otherwise lacklustre market.

According to media reports, JP Morgan has maintained an overweight rating on Zomato, with a target price of Rs 340 per share. 

The stock had hit a record high of Rs 280 on August 19.

At 10:40 AM, it was trading 5 per cent higher at Rs 255, as compared to the 0.2 per cent decline in the BSE Sensex. The average trading volumes on the counter jumped over two-fold, with a combined 83.99 million equity shares changing hands on the NSE and BSE.

Since August 20 this year, Zomato's stock had been underperforming the market and was down 13 per cent (till Wednesday), after Antfin Singapore Holding divested a little over 2 per cent stake, or 185.44 million equity shares, in the online food delivery firm for Rs 4,771 crore through open market transactions.

Antfin Singapore Holding Pte is an arm of Ant Financial Group, which in turn is a part of Chinese e-commerce giant Alibaba.

According to JP Morgan, Zomato is spearheading a rapid retail consumer transformation through its quick commerce business, adding that Blinkit will have a way to scale faster than its peers and current targets, a report from CNBC TV18 stated.

Meanwhile, last month, Zomato had completed the acquisition of fintech major Paytm’s entertainment ticketing business, Paytm Insider, according to both the companies' regulatory filings.

Under the deal, Zomato has fully acquired Paytm’s movie ticketing business Orbgen Technologies Pvt Ltd (OTPL) for Rs 1,264.6 crore and its events ticketing business Wasteland Entertainment Pvt Ltd (WEPL) for Rs 783.8 crore.

The management believes that going-out experiences will continue to see strong growth, with overall growth in lifestyle and consumption.

In terms of profitability, in the near term, the management expects the going-out business to continue to remain near break-even on adjusted earnings before interest, tax, depreciation and amortisation (Ebitda)-basis (as has been the case so far).

"In the medium to long term, this business has the potential to deliver 4 to 5 per cent adjusted Ebitda margins as a percentage of gross order value (GOV) if we execute well," the company's management said.

Meanwhile, Motilal Oswal Financial Services (MOFSL) has a ‘Buy’ rating on Zomato, with a target price of Rs 300 per share. The brokerage firm believes that in the context of Zomato’s scale, discussion around fair valuation for the business is too premature.

Zomato has already demonstrated its capability to unlock value from its acquisitions earlier, most notably from Blinkit that it acquired for around Rs 4,500 crore in 2022.

On its own, the company's ticketing app 'District' could be a small part of Zomato’s business, but if executed correctly, it could give Zomato a strong mind share in the spending patterns of urban consumers across key forms of recreational or staple spending, such as groceries, food, and recreational going-out activities spanning dining, movies, sports, and music, MOFSL stated.