Shares of Zomato Ltd climbed 8 per cent in Thursday’s trade after foreign brokerage JPMorgan upped its target price on the stock to Rs 340 from Rs 208 earlier. The stock has been seeing flurry of upgrades in target price, as analysts turn positive on its quick commerce business Blinkit.
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Earlier this week, CLSA raised its price target on Zomato from Rs 350 to Rs 353, saying Zomato is its top pick in India consumer due to its rapid growth and Blinkit’s market share. Bernstein, on the other hand, suggested ‘Outperform’ on Zomato with a target of Rs 275.
Now JPMorgan has reportedly raised its forecasts Zomato by 15-41 per cent for FY25-27, saying the online food aggregator is spearheading rapid retail consumer transformation via convenience and selection-focused quick commerce. The foreign brokerage said Zomato is going deeper across all Metros having proven the model in NCR and that its scale should help it drive monetisation from channel margins and ad spending.
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On Thursday, the scrip rose 7.65 per cent to hit a high of Rs 261.50 on BSE. With bulk of stores now crossing positive DS level thresholds, incremental store economics should turn more Ebitda positive, giving Blinkit license to scale faster than peers & current targets, JPMorgan reportedly said.
“Competition has intensified with players Flipkart and BigBasket (now transitioning to a full QC model) entering the landscape. Also, strong incumbents like Zomato and Zepto are set to double their store count next year. As players add stores in overlapping geos, price competition and discounting may increase over the next 12 months. Maintain LONG on Zomato with a multiples-driven SOTP-based Dec’25 target price of Rs 315 (Rs 300 earlier),” Equirus Securities said in a note.
Earlier, CLSA in a note said the quick commerce is reshaping India’s retail supply chain by flattening distribution, giving new brands increased visibility and price competitiveness.
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“As Blinkit’s parent, Zomato will be the largest beneficiary in the listed space, while Marico and Hindustan Unilever face substantial risks as their distribution advantage erodes. We forecast Blinkit will achieve adjusted Ebitda and net profit positivity by FY25, contributing up to 34 per cent of our FY26 EPS for Zomato,” CLSA said.
Modern retailers usually buy products from staple companies at a 22-25 per cent discount to maximum retail price (MRP). But the successful retailers such as Avenue Supermarts Ltd (DMart) can work with lower 14-15 per cent gross margins, allowing them to pass on the discounts to customers and win share.
In the case of general trade channel, the various parts of the value chain combine to take 19-
33 per cent of MRP as margins. However, because these margins are shared among multiple players, the ability to undercut is limited, CLSA said.
“As a result, the maximum retail price determined by the consumer companies is more sacrosanct, allowing them more control over pricing. While quick commerce is currently margin accretive for consumer companies with a 20-22 per cent discount, they too have the ability to pass savings to the consumer, effectively taking away some pricing control from FMCG companies,” CLSA said.
