With Zomato’s transition into profitability, brokerage firms are swiftly revising their target prices higher.

After achieving profitability for the first time, Zomato Ltd witnessed a series of upward adjustments to its target price from multiple brokerage firms. Despite these changes, many brokerages have maintained their existing stock ratings. Among the revised target prices, Motilal Oswal Securities predicts a 28 percent increase to Rs 110 per share, JM Financial anticipates a 37 percent rise over the next year to reach Rs 115 per share, and Citi has raised its target price from Rs 84 to Rs 115. Morgan Stanley has also elevated its target price from Rs 85 to Rs 115 per share.

Goldman Sachs now expects the target price to reach Rs 100, up from Rs 82, while Jefferies India projects a target price of Rs 130, compared to the previous Rs 100. Kotak’s revised target price is Rs 105, up from Rs 95, for the coming year. HSBC has increased its target price by 20 percent to Rs 102.

On August 3, Zomato reported a net profit of Rs 2 crore in the first quarter of the current financial year, accompanied by revenues of Rs 2,416 crore, reflecting a 70.9 percent increase compared to the previous year. This growth was attributed to a recovery in demand due to cooling inflation and the strength of the food delivery platform’s loyalty program.

JM Financial commended Zomato’s earnings as “stellar,” acknowledging that this description fell short of capturing the true extent of the achievement. The company’s performance surpassed even the confident expectations of many, demonstrating a remarkable level of success that exceeded all anticipations. Jefferies also highlighted the significant milestones Zomato reached post its IPO, including becoming adjusted-EBITDA and consolidated PAT positive earlier than expected.

These positive results have enhanced the credibility of Zomato’s management team and its execution capabilities. The company’s quick commerce business, Blinkit, which was previously undervalued, has gained positive momentum. As a result, Jefferies has significantly revised their EBITDA projections upward.

Zomato’s food delivery gross order value (GOV) expanded by 11.4 percent to Rs 7,318 crore, with average monthly transacting users increasing by 5.4 percent to 17.5 million. Blinkit’s GOV grew by about 5 percent sequentially to Rs 2,140 crore, while the average order value (AOV) increased by 11.5 percent to Rs 582.

HSBC’s latest note expressed positivity about Zomato’s future, particularly in the quick commerce business (Blinkit), which they anticipate could be as significant as the food delivery business in terms of value and unit economics.

However, not all brokerages have shared the same enthusiasm. Nomura Research, Dolat, and Macquarie Research have reduced their target prices. Nomura’s target price has been lowered by 37 percent to Rs 60, Dolat has decreased it by 25 percent to Rs 65, and Macquarie has maintained its underperformance rating with a target price of Rs 55.

Zomato remains optimistic about its future outlook, projecting a remarkable growth rate of +40 percent in adjusted revenue over the next few years, leading to continued improvements in contribution margin (CM) and adjusted EBITDA margin. Despite this positive trajectory, Nomura expresses skepticism about Zomato’s ability to achieve a double-digit CM amid sustained high growth in the long run.

Macquarie’s latest report raises concerns about the growth drivers for Zomato’s core food delivery business, noting a lack of clarity from the management. The report suggests that if a substantial portion of the growth guidance is driven by Hyperpure, Going Out, or Blinkit, it may not necessarily contribute significant value.

In summary, Zomato’s recent financial achievements have prompted varied responses from different brokerages, with some expressing strong confidence in its potential for growth and profitability, while others maintain a more cautious stance.