Eternal (Zomato) has reported a revenue increase of 7.9% quarter on quarter, surpassing our estimate of 6.5%, reaching Rs 58.3 billion. This growth is primarily driven by the Blinkit and HyperPure businesses, which experienced growth rates of 22% and 10% respectively on a quarterly basis. However, the F.D business saw a slight decline of 1% quarter on quarter due to weak demand. The EBITDA margin stood at 1.2%, which was lower than our projected margin of 3.5%, impacted by increased operational expenses linked to Blinkit’s rapid store expansion and higher investments in the Going out segments. Additionally, the Other segment, which includes new initiatives, reported a loss of Rs 160 million. The various factors at play and the expansion plans introduce uncertainty regarding future margin improvements.
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Dolat Capital Report
Eternal Ltd. (Zomato) is actively pursuing growth in its Quick commerce sector in India while retaining its position as a leader in food delivery. The Going-out business is expected to gain from the integration of Paytm’s Insider business and its associated investment strategies.
We anticipate growth across all key metrics including orders, annual order value, monthly active users, and new user acquisition. However, we believe that the journey toward profitability will be inconsistent, particularly in the short term.
Currently, we project a revenue compound annual growth rate of approximately 32.3% from FY25 to FY30, followed by an estimated 15% growth in the second stage from FY30 to FY40. We expect an average EBITDA margin of around 7% between FY26 and FY40, a cost of capital of about 11%, and a terminal growth rate of roughly 3%. Considering these assumptions, along with high valuations, we maintain our ‘Sell’ rating on Zomato with a target price of Rs 170, which translates to about 4 times FY27 estimated sales or 70 times FY27 estimated earnings.
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