The shares of Zomato Limited were trading 2.2 per cent higher till the afternoon on Friday at Rs 62.75 levels. In the past month, the stock has been volatile and gained more than 12 per cent. In the past six months, the stock has shed more than 21 per cent of its value. On a yearly basis, the stock has declined by 55 per cent.
Despite this the Global brokerage Credit Suisse maintained an outperform rating on Zomato with a target price of Rs 90 which represents an upside of 46 per cent from the current levels.
“Current estimates could drive a valuation shift to EV/EBITDA. Zomato already has a positive model in the top 120 cities,” Credit Suisse said.
On the concerns of Zomato’s presence only in metro cities, Credit Suisse expects to see profitable growth in smaller cities. Zomato already has a positive model in the Top 120 cities (nearly 70% of orders).
In future growth, the brokerage sees significant potential for high-frequency users (5% of users) and mid-frequency users (26% of users) to increase further. It expects these users to grow to 10% from the current 5%, while mid-frequency users are expected to expand to 35% from the current base of 26% by FY27.
In Q1FY23, the company’s total income rose to Rs 1,582 crore this quarter against Rs 916.6 crores which it earned in the corresponding period of last year.
Zomato was able to narrow down its losses to Rs 186 crores from Rs 360.7 crore in the year-ago period. This quarter the company was able to make its food delivery business hit break-even at the EBITDA level.
Zomato is an Indian multinational restaurant aggregator and food delivery company. It also offers information, menus, and user reviews of restaurants as well as food delivery options from partner restaurants in select cities.
Written by Anoushka Roy
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