Debasis Mohapatra
Bengaluru, 19 August 2024
After posting better-than expected first quarter results, food aggregator platform Zomato’s stock has seen a slew of upgrades in recent weeks.
The latest to upgrade the stock is UBS, which in a report said the quick commerce business has exceeded expectations in terms of performance and put the company in good stead.
“Q1 of Zomato surprised positively with stronger quick commerce GMV growth. It saw a solid 27% growth in food delivery. Quick commerce & food delivery growth came ahead of estimates,” UBS said.
“Margin expansion in both quick commerce & food delivery came above estimates. Management was optimistic with an implicit positive guidance revision,” the report said.
Zomato saw its net profit surging 126.5 times to hit Rs 253 crore in the April-June quarter (Q1FY25), compared to the year ago period, though the food aggregator hiked platform fees charged to consumers and saw an improvement in the operational profitability of its quick commerce arm Blinkit.
With this, Zomato’s earnings came in the green for the fifth straight quarter. Its revenue rose 74% to Rs 4,206 crore at a time when the broader e-commerce sector is reeling under the pressure of high inflation and muted demand.
“We believe that GOV (gross order value) growth of 20% plus should be able to continue in the near term as well. Currently, we’re trending at 27%-28% YoY (year-on-year) growth. So that might fall a little, but by and large, we don’t see any specific concerns on the demand side at this point, at least in our business,” Akshant Goyal, Chief Financial Officer of Zomato has said during the Q1 conference call. He was answering to a question on how the demand environment in ‘Blinkit’ would look like in coming quarters as many ecommerce companies have predicted about demand moderation.
“The margin (of food delivery business) has been expanding over time while we continue to invest in growth and the long-term health of the platform….We’ll do the right things and hopefully continue on that journey on margin expansion from thereon. And in a few quarters from now on, we should get to that range (4-5% margin in food delivery business), we’re talking about, we’re not very far from that now,” Goyal has said during the analyst call.
