zomato Shares that started trading on Indian stock exchanges in July have risen over 45% from their IPO issue price ₹76 each with stock currently approx. doing business on ₹139 per share level. Brokerage firm Jefferies sees huge potential in the stock of the food-delivery platform with a one-year time frame.
“In our upside case, we expect a 42% CAGR in delivery GOV in FY20-26E to reach US$12bn by FY26E. We believe strong growth in new user acquisition/order volume growth and AOVs are also at healthy levels. “Other segments also grow strongly as the platform grows,” Jefferies said in a note on Zomato.
However, on the downside, Covid-19 caused additional disruption in FY22, exacerbated by increased competition from Swiggy, direct orders etc., it said.
The GST Council has made food delivery platforms liable to pay GST with effect from January 1, 2022. However, no new tax has been introduced, but it is just a transfer of the responsibility of paying GST from the restaurant to the platform. Therefore, Jefferies said there is no impact on customer bill value, although the change may increase some compliance burdens on the platform and on restaurants.
Zomato expanded into the healthcare space in early 2021. “We were surprised by this move, as we did not see the winning authority for Zomato, which has a strong association with deliveries. While healthcare is still a small market, there are options available in the online/offline space,” the note highlights. Zomato’s acquisition of Grofers’ stake provides exposure to the grocery theme and shows Jefferies the potential for further investments. gives.
Jefferies on Zomato comes with a base case target price of ‘buy’ recommendation ₹175. However, it may convert the position above the stock to . looks at ₹270 while negative condition ₹90 per share.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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