JM Financial Sees Another Muted Quarter For Zomato’s

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According to a research note by JM Financial, Zomato’s food delivery gross order value (GOV) growth is expected to remain muted for the third consecutive quarter in Q4 FY23 due to inflationary pressure and the company’s growing focus on improving overall profitability. Zomato’s food delivery segment had only grown 0.7% sequentially in the prior quarter. However, the brokerage remains optimistic about the company’s long-term growth and profitability, despite the impact of growth moderation. It expects the foodtech giant’s food delivery segment to grow at a CAGR of about 21% between FY23 and FY27. Zomato is aiming to achieve a full EBITDA break-even by Q2 FY24 or earlier. JM Financial has a target price of INR 100 on the stock, implying an upside of 85% to its last close.

JM Financial noted that Swiggy’s take rates for its restaurant partners on average are relatively higher than that of Zomato by about 200 basis points (bps), which the latter is now attempting to narrow. And the recent hike in commission rates was probably a step in that direction, the brokerage said.  According to a report by JM Financial, Zomato’s net loss widened to INR 346.6 Cr in Q3 FY23 on both YoY and sequential basis. Despite this, the company has been focusing aggressively on becoming profitable and improving food delivery growth numbers. The report also highlighted that Zomato is seeking a 2%-6% hike in commissions from partner restaurants, possibly as a step towards narrowing the gap between its take rates and those of Swiggy, which on average are higher by about 200 basis points. JM Financial has a target price of INR 100 on the stock, implying an upside of 85% to its last close. Zomato closed at INR 53.97, up 3.5% on the BSE.