The relaunch of Zomato’s membership program and its potential impact on the profitability of the food delivery vertical, going forward, continues to intrigue the Street, highlighted brokerage JM Financial. While management believes the short-term negative impact of free distribution will be offset by improvements in other revenue and fixed and variable cost drivers, the complexity in forecasting margins keeps the debate raging.
“Based on initial feedback from a small sample set of customers and management commentary of green shoots visible as growth in the app opens post launch, we believe, ceteris paribus, that the Gold launch will definitely will drive order volume. We also believe that the company has leverage on both revenue (restaurant commission take rates and advertising revenue) as well as variable costs (such as closing operations in 225 loss-making cities and efficiencies related to delivery partners). There are enough levers. partially (if not completely) negate the effect of free distribution benefits Sleep Member,” the note said.
JM Financial remains bullish on the company’s long-term prospects in the hyperlocal delivery space, as we believe it is well positioned to benefit from strong industry tailwinds such as improving technology penetration and rising income share of digitally native millennials/GenZ. is in position. Balance sheet also remains strong with net cash of Rs. 113 billion by December 2022.
The brokerage house said that Zomato remains a long-term story and maintains a buy rating on it. zomato shares with a target value of 100 each, indicating a potential upside of over 95% from the current stock level.
“We raise our FY23-25 revenue estimates by 3-6%, primarily due to the strong beating in the Hyperpure business. Additionally, we raise our EBITDA margin estimate by 160 bps/220 bps over FY2023/FY24, as the operating loss in Q3 of FY23 is lower than estimated.
Online food delivery platform reports widening of consolidated net loss 346.6 crore for the third quarter ended December 2022, impacted by higher expenses and a slowdown in the food delivery business, as against a loss 67 crore year-on-year (YoY).
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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