Eternal Ltd. share price target

Zomato achieved adjusted EBITDA (consol.) break-even in Q1FY24 (2-3 quarters ahead of guidance). Adjusted EBITDA margin (consol.) improved 760bps QoQ vs our estimate of 320bps improvement. This was driven by 11% QoQ GOV growth in food delivery and superior cost control led by organisation restructuring. In addition, management commentary with regards to growth outlook improved materially over Q4FY23.

We note a sustained improvement in profitability of the food delivery business and meaningful reduction in losses in the hyperpure and quick commerce businesses. This in our view has significantly improved visibility of profitability in the medium term.

Blinkit delivery executives servicing ~50% of the dark stores in the NCR area are on strike since 12thApr’23 demanding roll-back of recent changes made to delivery incentive structures in the region, according to media reports

We note Zomato’s focus shifting to increasing its power users vs penetration-led gains in food delivery. This, we think augurs well for profitable growth. Company has exited 225 cities, which contributed 0.3% of GOV in Q3FY23, which in our view indicates disenchantment with a long tail of sub-scale operations.

Food delivery GOV growth slows as contribution margin improves. Zomato’s food delivery gross order value grew 3.1% QoQ and 22.6% YoY in Q2FY23.