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Zomato shares experienced a notable surge of 6 percent during morning trading on February 12, reaching a fresh 52-week pinnacle of ₹158.80 on the National Stock Exchange (NSE). This surge propelled the stock closer to its record peak of ₹169, attained on November 16, 2021.
The upswing follows Zomato’s impressive financial performance, with the Gurugram-based food aggregator reporting a consolidated net profit of ₹138 crore for Q3FY24, a significant turnaround from the net loss of ₹347 crore in the corresponding period of the previous fiscal year.
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A key driver behind this positive trajectory has been Zomato’s enhancement of its contribution margin, a crucial profitability measure, which expanded to 7.1 percent in the December quarter. This improvement was attributed to the introduction of a platform fee for food deliveries.
As of 1:38 pm, the stock was trading 3 percent higher at ₹155.20 on the NSE. Zomato’s remarkable performance over the past year underscores its status as a multibagger stock, having surged by over 200 percent. This stellar growth outpaces the benchmark Nifty, which has seen a comparatively modest increase of 21 percent during the same period.
Brokerage firm Elara Securities downgraded the stock to ‘Accumulate’ from ‘Buy’, while raising target price from ₹165 to ₹150. “We downgrade ZOMATO to Accumulate from Buy (stock has moved up by 50% in the last six months, largely factoring healthy growth and profitability) with raised SOTP-TP of INR 165 from INR 150, as we have raised the target one-year fwd. EV/EBITDA of food delivery to 50x (from 47x). Good execution on growth and profitability in the food/quick commerce businesses are key monitorables. We have assigned one-year fwd. EV/sales of 6x (unchanged) and 2.5x (unchanged) to Blinkit and Hyperpure, respectively,” it said.
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As per analysis by brokerage company Motilal Oswal, the food delivery industry in India remains at an early developmental phase, offering significant potential for expansion in the future.
“With a dominant market share and strong growth in the food delivery business and Hyperpure, we expect Zomato to report a strong 38 percent Adjusted revenue CAGR over FY24-26,” the brokerage said, reiterating its ‘Buy’ call on the stock.
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Published: 12 Feb 2024, 05:29 PM IST
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