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Solid revenue; Favourable outlook

Zomato Ltd is a leading food delivery aggregator in India, with a presence in 23 other countries.

* In Q2FY25, revenue surged 68.5% YoY to reach Rs 4,799cr, driven by strong performance in key segments.

* The India food ordering and delivery segment witnessed a 30.1% YoY increase in revenue to Rs 2,012cr, whereas Hyperpure and quick-commerce businesses saw an increase of 97.7% and 128.9% YoY, respectively.

* EBITDA stood at Rs 226cr, largely driven by platform fees and higher ad revenue, and might only witness a stable rise in the near term.

* The EBITDA margin increased to 4.7% from 1.7% in Q2FY24, primarily driven by revenue increases, partly offset by elevated operating expenses, which included wage increases and expenditures associated with the expansion of BlinkIt.

* The expansion of the food delivery sector is likely to be driven by an increase in user acquisition and order frequency, while the average order value (AOV) is expected to experience modest annual growth in low single digits amid a challenging demand situation in the quick service restaurant (QSR) industry.

Valuation

Zomato's management expects the going-out segment's gross order value (GOV) to grow more than 3x moving forward, reaching upwards of Rs. 1,000cr from Rs. 323cr in FY24. There is further potential for growth contingent upon the company's ability to introduce additional use cases to the platform, including shopping and staycations. With the current performance metrics showing improvement, we believe that growth in all key areas — orders, AOV, and new user acquisition — should enhance the profitability going forward. Hence, we reiterate our BUY rating on the stock with a revised target price of Rs 284 based on 8.5x FY26E price/ sales

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SEBI Registration Number: INH200000345