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Meets growth expectations despite intense competition Fortifies long-term marggin guidance for Blinkit, though capex elevated

* Eternal reported 1QFY27 net revenue of INR202b (up 16.9% QoQ/182% YoY), above our estimate of 8.5% QoQ/161.8% YoY.

* Food Delivery NOV came in at INR108b, in line with our estimate of INR107.3b. Blinkit NOV came in at INR171b (up 86% YoY) vs. our estimate of INR170b. For Food Delivery, adjusted EBITDA as % of NOV margin increased 10bp QoQ at 5.6%, vs our estimate of 6.1%.

* Blinkit reported contribution margin of 5.3% (5.4% in 4QFY26). Adj. EBITDA margin was at 0.6%, in line with our expectation of 0.6%. 1QFY27 PAT stood at INR920m, rising 268% YoY (est. INR4,066m). Our TP of INR400 implies a 41% upside from the current price. We reiterate our BUY rating.

Our view: Peak competition, but execution remains on track

* Competitive intensity the highest, but strategies diverging: Competitive intensity in quick commerce remains high. Management indicated that 1Q experienced ‘peak intensity’ to date, although competition has now become predictable. We believe divergent strategies among established players are emerging, with various players adopting either one or a combination of expansion, assortment, or pricing as the differentiating factor.

* Straight coupon-based discounting appears unsustainable. Even as the market remains crowded, newer players looking to scale from scratch could continue to keep the market irrational for slightly longer. The next stage of competition may weed out some players, as competition emerges beyond coupon discounting into assortment intelligence as well as supply chain efficiency.

* Adjusted EBITDA in quick commerce improves; long-term guidance raised: Management has guided to achieve the higher end of its long-term margin range: reported EBIT margin of ~4% and adjusted EBITDA margin of ~6% (guidance range of 5-6%). This was despite the near-term increase in take rates not yet translating into CM gains. Management attributed this to minimum wage increases across several states and the opening of larger stores, which led to a slight lag on CM gains.

* However, with the business model now established and competition being more ‘predictable’, management expects structurally higher margins going forward. While continued elevated competition may lead to near term gains being pruned, this guidance upgrade is a positive. Management's long-term target of 60% and NOV growth, coupled with an EBITDA target of USD1b by FY29, appears increasingly achievable. Our estimates continue to factor in this long-term trajectory.

Valuation and changes to our estimates

* Eternal's food delivery business remains stable, while Blinkit continues to offer a long runway to participate in the structural shift in retail, grocery, and ecommerce. We trim our FY27E EPS estimate by 7% largely driven by a higherthan-expected tax in 1Q, while keeping our FY28E estimates unchanged. While competitive intensity remains elevated, competition is becoming more predictable, and the business model appears established, with a clearer path to structurally higher margins.

* We continue to factor in management's long-term growth trajectory of 60%+ NOV growth and USD1b EBITDA by FY29, led by gradual margin expansion through store maturity and operating leverage. We expect Eternal to report PAT margins of 2.2%/3.0% in FY27/28E. Our TP of INR400 implies a 41% upside from the current price. We reiterate our BUY rating

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