Zomato Share Price Expected to Surge by 16% – Discover the Reasons
Zomato Share Price
Kotak Institutional Equities, a well-respected brokerage firm with a history of insightful analysis, has recently issued a ‘Buy’ rating for Zomato, a leading player in the highly competitive food delivery industry.
Their comprehensive analysis reveals several compelling factors that contribute to an optimistic outlook for Zomato and its stock.
One of the key indicators of Zomato’s promising future is its impressive user base growth. During the fiscal year 2023, the company experienced a noteworthy annual growth rate of 9% in its food delivery segment.
This substantial increase in the number of users reflects the growing popularity and trust in Zomato’s services.
Notably, Zomato has been able to capture and retain the interest of a larger audience, which is a critical factor for the growth of any tech-driven company in the current business landscape.
Additionally, Zomato’s performance was further bolstered by the success of its subsidiaries, Blinkit and Hyperpure. These ancillary businesses have shown marked improvement, indicating that Zomato’s diversification strategy is indeed paying off.
The enhanced performance of these subsidiaries not only adds value to Zomato’s ecosystem but also boosts its overall financial health.
Taking these factors into account, the analysts at Kotak Institutional Equities express a bullish sentiment towards Zomato’s shares.
Their ‘Buy’ rating underscores their confidence in the company’s prospects, and they have set an ambitious target price of Rs 125 per share. This target price represents a remarkable 16% increase from the company’s closing price on October 23, 2023.
In a market where returns can be volatile, a 16% increase is a noteworthy projection that is sure to attract the attention of both investors and analysts.
The exceptional performance of Zomato’s stock is further underscored by its recent history. Over the past three months, Zomato’s stock has demonstrated impressive growth, with a surge of 31%. In comparison, during this same period, the broader Sensex index has experienced a 3% decline.
This stark contrast highlights Zomato’s resilience and its ability to outperform the market, making it an appealing choice for investors looking for high growth potential.
Delving deeper into their analysis, Kotak Institutional Equities’ research note provides key insights into Zomato’s operational performance and financial health.
One standout point is the notable increase in unique transaction users within Zomato’s food delivery business, a growth rate of 9% on an annual basis.
This statistic indicates not only an expanding user base but also a high level of engagement, as users continue to utilize Zomato’s services.
The average order value (AOV) for Zomato in fiscal year 2023 reached Rs 407, marking a 2% annual increase. This increase can be attributed to a rise in revenue per order.
A higher AOV signifies that customers are spending more on each order, indicating both increased customer satisfaction and the potential for higher profitability for the company.
These statistics are often critical for investors, as they provide insights into the financial health and potential growth of the company.
A significant highlight in the research note is the anticipation of a 19% Compound Annual Growth Rate (CAGR) in the gross order value (GOV) of Zomato’s food delivery business from 2023 to 2026.
A strong projected growth rate in GOV is a promising indicator of Zomato’s continued success in expanding its business and increasing its market share. It also suggests that Zomato’s strategy is well-aligned with the evolving preferences and needs of its customer base.
Moreover, Zomato’s growth is not limited to its core food delivery business. The June quarter saw a remarkable 77% year-on-year increase in the number of monthly users on Zomato’s quick commerce platform, Blinkit. This surge in users is a testament to the effectiveness of Zomato’s diversification strategy.
The ability to expand its services and cater to a broader range of customer needs makes Zomato a more versatile and attractive player in the food delivery industry.
Zomato’s commitment to providing high-quality ingredients to restaurants through Hyperpure, another subsidiary, has also paid off.
In fiscal year 2023, Hyperpure’s revenue increased by a substantial 90% on an annual basis. This remarkable growth not only contributes to Zomato’s revenue but also reinforces its position as a valuable partner for restaurants looking to maintain high standards of quality.
However, it’s important to acknowledge some challenges that Zomato faced during the fiscal year 2023. Analysts at Kotak Institutional Equities point out that Zomato’s cash balance experienced a 2% decline during this period. This dip can be attributed to losses incurred in the core business and the acquisition of Blinkit.
While the decline in cash balance may raise concerns, it’s essential to recognize that it was a result of strategic decisions and investments aimed at expanding and diversifying the company’s offerings.
Simultaneously, Zomato managed to significantly reduce its remaining liabilities by an impressive 42% on an annual basis.
This reduction is a positive development for the company as it suggests a healthier balance sheet, which is essential for its long-term sustainability and financial stability.
One of the standout aspects of Zomato’s strategy is its commitment to sustainability and aligning with global environmental goals.
As a member of the Climate Group’s EV100 initiative, Zomato has set an ambitious target to transition to 100% electric vehicle-based food delivery by 2030.
This commitment to environmental sustainability not only benefits the planet but also resonates with the growing preference among consumers for businesses that prioritize eco-friendly practices.
The success of this sustainability initiative is evident in the numbers. In fiscal year 2023, the number of active electric vehicle-based delivery partners of the company increased threefold.
This is a clear indicator of the company’s ability to execute on its sustainability goals while maintaining its operational efficiency and capacity to meet the rising demand for its services.
Moreover, Zomato has strategically partnered with more than 50 companies within the electric vehicle ecosystem. These partners include prominent names such as Sun Mobility, Zypp, and Yulu.
These collaborations enable Zomato to access cutting-edge technology and infrastructure, ensuring the success of its electric vehicle-based delivery initiative.
This initiative, in addition to being environmentally friendly, also positions Zomato as a forward-thinking and innovative company, appealing to environmentally conscious consumers and investors alike.
In conclusion, Kotak Institutional Equities’ ‘Buy’ rating for Zomato is backed by a thorough analysis of the company’s performance and potential.
Zomato’s impressive growth in its user base, along with the success of its subsidiaries, Blinkit and Hyperpure, make it an attractive choice for investors seeking opportunities in the food delivery industry.
The 16% target price increase from the brokerage firm is a testament to their confidence in Zomato’s future.
The company’s ability to outperform the market, as evidenced by the 31% surge in its stock over the past three months, sets it apart in a competitive landscape.
Zomato’s financial indicators, including the growth in unique transaction users, increased AOV, and the projected 19% CAGR in GOV, provide a solid foundation for future growth.
Challenges, such as the decline in cash balance, are offset by the reduction in liabilities, indicating a well-balanced approach to financial management.
Zomato’s commitment to sustainability and its ambitious target of 100% electric vehicle-based delivery by 2030 align with broader environmental goals and demonstrate its forward-thinking approach.
The partnerships with leading players in the electric vehicle ecosystem underscore Zomato’s ability to execute on its sustainability goals effectively.
This multifaceted strategy, combining financial strength, operational excellence, and a commitment to sustainability, positions Zomato as an appealing investment choice and a company with a promising future in the ever-evolving food delivery industry.
As investors and market watchers look for opportunities with high growth potential, Zomato stands out as a compelling candidate worthy of further consideration and analysis.
