Zomato’s share price has jumped 5% since the company released its first quarter results earlier this week. (Photo: REUTERS)
Zomato share price has so far climbed 77% from the high end of the IPO price, but the rally could spread further according to analysts at the global brokerage firm and Bernstein Research. Looking at Zomato’s quarterly earnings, where he reported an increase in net losses, Bernstein believes the stock could rise 27% from current levels. “The food delivery industry had the highest performance ever across all metrics: gross order value (GOV), number of orders, active partner restaurants and active delivery partners. The company has placed one billion cumulative orders with 10% of those orders delivered in the past 3 months, ”said Bernstein.
Check the price live: Zomato
Zomato’s share price has jumped 5% since the company announced its first quarter results earlier this week, now trading at Rs 135 per share. Zomato’s stock price rally comes despite news of net losses. During the April to June quarter, Zomato’s net loss amounted to Rs 360 crore, compared to Rs 99.8 crore in the same period last year.
Back on the path to growth but lower contribution margins
While net losses were worse than before, the food tech giant saw its GOV increase 37% quarter on quarter to 45.4 billion rupees, from 33.1 billion rupees in the January-March quarter. . Zomato’s adjusted revenue growth increased 26% from the previous quarter to Rs 11.6 billion. The meal delivery business resumed growth despite the second wave of covid-19 in April. The out-of-home catering activity recorded a decrease compared to the previous quarter.
The company did not share the average order value for the April-June quarter, but said the food delivery business made a positive contribution although contribution margins declined slightly from the quarter of January to March due to growth investments. Meanwhile, the Hyper pure activity (B2B procurement activity) increased its losses. “We estimate that the contribution margin was reduced to Rs 15 during the April to June quarter. This is due to the moderation of the AOV and higher discounts during the quarter. Zomato’s positive contribution margin per order in recent quarters, driven by lower discounts spent per order, ”the report states. Zomato had a contribution per order of Rs 20.5 during the previous fiscal year.
Price target and valuation
Bernstein analysts value Zomato’s food delivery franchise at 8.0x NTM while the range of global / regional peers is around 4.5x-11 EV / sales. Zomato Pro activity at 32x EV / EBITDA, while B2B procurement activity at 8.0x sales. The brokerage firm has an outperformance rating on Zomato with a target price of Rs 170 per share.
(The stock recommendations in this story are by the respective research and brokerage firms. UK Time News Online assumes no responsibility for their investment advice. Please consult your investment advisor before investing.)
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