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Blinkit’s expansion surprises positively

Eternal (ETERNAL IN) posted an in -line Q2, with revenue up 77.6% YoY to INR 241.4bn ( in line with estimate s). Key highlights were : a) Blinkit ’s NOV grew 79.3% YoY and adjusted EBITDA rose to 0.9% of NOV , b) m anagement raised its Mar '27 store target to >3,500 (from 3,000), plan ning ~5,000 stores by Mar'28 and c) ETERNAL expects NOV growth to pick up from Q3FY27 as it sees competition turning more predictable . Food delivery (FD) NOV grew 21.5% YoY, but management has guided for flat margin in the next 1-2 years. We raise FY27E revenue estimate by 5.7% and cut EBITDA by 3.4%. We retain Buy with a higher TP of INR 425 (from INR 400) on higher growth visibility at Blinkit . Dark.ai, a privacy -focused AI model by ETERNAL, is targeted for launch in 2026 .

Blinkit – Store expansion guidance upgraded; growth and profitability healthy: Blinkit’s store expansion guidance was a positive surprise – It rais ed its Mar ’27 target from 3,000 to >3,500 stores, alongside ~5,000 stores by Mar ’28. Per Blinkit , the competition is more predictable now . We raise our FY27E store count estimate to 3,500 (+56% YoY vs . 25-30% earlier), in line with our thesis that easing competitive intensity would prompt Blinkit to accelerate expansion ahead of peers. Despite competition, expect Blinkit to defend its market share, led by superior execution. A meaningful share of incremental stores is coming from non -metro markets, reflecting rising quick -commerce adoption beyond metros. Orders per day rose to ~4.3mn in Q2FY27 from ~1.0mn in Q2FY25, while mature -city adjusted EBITDA marg in is over 5% of NOV. Blinkit’s adjusted EBITDA of INR 1.84bn, up 80% QoQ, is well ahead of the ~27% quarterly compounded growth required in the next 10 quarters to achieve our FY29E adjusted EBITDA target of INR 58.1bn. Also , execution, a large addressable market and non -metro penetration yield strong visibility on growth and profitability.

Food delivery – Expect margin to be flat: FD NOV grew 21.5% YoY, with adjusted EBITDA at INR 6.27bn, up 24.7% YoY (5.5% of NOV , flat QoQ ). ATU surg ed by 16% YoY to 28mn. However, the absence of any guidance relating to incremental margin improvement was a slight negative surprise – management expects margin to stay flat in the next 1-2 years while it reinvests in growth. This reflects business maturity and potentially rising competitive intensity from players such as Rapido and Flipkart, particularly if discounting and pricing aggression increase . Consequently, we see limited scope for further multiple expansion in FD, which we now value at 38x Dec -28E EV/EBITDA (from 42x)

Retain Buy with a higher TP of INR 425: Factoring in Blinkit’s accelerated expansion, we raise our FY27E/28E/29E revenue estimates by 5.7%/1.9%/1.8 % but cut EBITDA by 3.4%/2.6%/1.5% and PAT by 17.2%/10.5%/4.5%, partly on higher depreciation and lease interest from a larger store base and losses in going -out segment . We roll forward to Dec -28E due to better expansion visibility , incremental acceleration on QC NOV growth. and value Blinkit at 52x EV/EBITDA, or 59% of our SoTP value , FD at 38x EV/EBITDA, going out at 5x EV/sales and Hyperpure at 3x EV/sales . We r etain Buy with a higher TP of INR 425 (from INR 400); ETERNAL remains among our top picks in India’s internet space. Key risks are higher competition in quick commerce (QC) and slower non -metro ramp -up

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