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global research firm hsbc He believes that creating a grocery business will act as a “poison pill” for Zomato.
This would require a reasonably high investment and hence be a waste of cash as well as it is likely to be a significant logistical challenge to execute.
The brokerage highlighted that Zomato aims to scale its kirana business closer to the middle of this framework and to offer 4,000-5,000 stock-keeping units with a delivery turnaround time of 10-60 minutes. Leveraging technology to design and manage stores.
It further added that the Average Order Value (AOV) has remained stable since the Covid-19-led growth, and is the biggest positive surprise since August 2021.
“Furthermore, fundamentally, we believe that unlike many other sectors in new technology, food delivery is relatively mature, with a healthy monopoly structure and clear value proposition. The creation and ramp-up of hyperlocal businesses is a major The challenge will remain there in the coming quarters, but we don’t think much value has been given to these businesses anyway,” he said.
HSBC has a ‘Buy’ call on the stock with a target price of Rs 85 per share.
However, Macquarie began its coverage on the stock with an ‘underperform’ rating with a target price of Rs 55 per share.
It said Zomato needs to add 7 million users every year to meet the earnings estimates. Scale is critical to improving profitability, and if Zomato is unable to rapidly grow its transacting user base, the negative impact on consensus estimates is magnified with the sharp cut required for Ebitda.
For the quarter ended March 2022, the company’s losses nearly tripled to Rs 360 crore, while revenue grew 75 per cent. The company’s loss for FY22 stood at Rs 1,222.5 crore as against Rs 816.4 crore in the previous year.
Zomato was listed in July 2021 with a strong premium. Retail investors held 3.52 per cent stake in the March quarter and 1.4 per cent as of September 30, 2021, compared to 1.6 per cent at the end of December quarter, showed data available with corporate database AceEquity.
At 3:19 pm, the shares were trading at Rs 69.95, down 0.07 per cent on the BSE. Zomato now has a market capitalization of Rs 54,958 crore as against Rs 98,731.59 crore on the day of its listing on July 23, 2021.
(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. They do not represent the views of The Economic Times)
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