Eternal Ltd. share price target

Zomato delivered another strong quarter as 1QFY25 revenues of INR42.06b grew 18.1% [QoQ, ahead of our estimate of 6.9% QoQ growth.

we initiate coverage on the stock with a BUY rating and value the company on SOTP valuation to arrive at a target price of Rs 280/share, implying an upside of 23% from the CMP.

Blinkit is accelerating its dark store addition trajectory, having achieved adj. EBITDA breakeven in Mar’24. Management guided for doubling store count to 1,000 by FY25 (~300 store pipeline ready).

Zomato posted steady operational results, with revenue ahead of our estimates
whereas the margin miss was on account of higher than expected ESOP costs
(for the Blinkit leadership team).

We interacted with industry participants to get a better understanding of the
Quick Commerce (QC) business. Key takeaways: a) QC companies have found
good product market fit in metros and large cities.

Zomato’s ability to ‘execute’ at scale is well recognised by investors. We believe the company is now gearing up to improve its credentials as an ‘innovator’.

We re-iterate our BUY thesis on Zomato (link). We believe the company is likely to achieve its medium-term adj. EBITDA guidance of 4-5% in food delivery and adj. EBITDA breakeven in Blinkit by Q1FY25E. Given the strong growth trajectory expected over the next 3-4 quarters as well as the distinct possibility of becoming the first company globally to achieve adj. EBITDA breakeven in grocery, we think further re-rating of the stock is due.