Zomato shares fall 6% but analysts project targets of up to ₹370

Zomato Ltd., the food delivery aggregator, saw its shares decline up to 6% on Wednesday post its September quarter results.

The food delivery giant reported a net profit of ₹176 crore for the July-September period. The company posted a net profit for the fifth quarter in a row.

Revenue on an adjusted basis for the quarter under review also increased by 69% from the same quarter last year to ₹4,799 crore.

The board of Zomato also approved a ₹8,500 crore fund raising proposal through the Qualified Institutional Placement (QIP) route, confirming a CNBC-TV18 newsbreak from earlier this month.

Global brokerage firm CLSA has maintained its ‘Outperform’ rating on the stock, with a price target of ₹370 from an earlier target of ₹353 per share. The brokerage cited Zomato’s ability to expand its market presence in the highly competitive food delivery industry.

HSBC also has a ‘Buy’ rating on Zomato, with a price target of ₹330 per share.

According to the brokerage, the Q2 food delivery numbers were in line with expectations, while its quick commerce segment outperformed. Margins remained largely stable quarter-on-quarter, driven by ongoing investments in expanding quick commerce capacity and brand building.

HSBC noted that Zomato’s recent fundraise will equip it with the resources to stay competitive and aggressive in the market.

Nomura, which holds a ‘Buy’ rating on Zomato with a price target of ₹320, said that the quick commerce segment is experiencing rapid growth, while the food delivery business continues on a steady growth path.

Zomato plans to focus on expanding quick commerce while maintaining a neutral EBITDA in the near term.

Nuvama Institutional Equites, in its note, wrote that Zomato continues to push the paddle of growth across its business. The brokerage expects Blinkit’s dark store addition to occur faster than initially anticipated, which could lead to even quicker growth. However, profitability may be delayed due to higher upfront costs—a strategy the brokerage believes is appropriate in the highly competitive quick commerce market.

Nuvama has retained a ‘Buy’ recommendation in Zomato, with a price target of ₹325 from ₹285 per share earlier.

Shares of Zomato are currently trading 3.85% lower at ₹246.50. The stock has fallen about 19% from its record high of ₹298.