After multibagger returns in 2024 YTD, brokerages remain bullish on Zomato

After a strong recovery in the last one year, multiple brokerage houses have become bullish on Zomato, one of India's leading food delivery aggregators.

Recently, global brokerage house JPMorgan upgraded its valuation for Zomato by an impressive 63 percent. The brokerage raised its target price for Zomato from ₹208 for June 2025 to ₹340 for December 2025, signalling a strong potential upside of nearly 31 percent. This bold revision reflects JPMorgan's confidence in Zomato’s dominant market position and growth prospects as the company continues to lead the transformation of the food delivery and quick commerce sectors in India.

Along with JPMorgan, SBI Securities is also bullish on Zomato and has a target price of ₹300 for the stock, indicating an upside potential of over 15 percent.

Zomato has evolved far beyond its original model as a restaurant search-and-discovery platform. Over the years, it has expanded into diverse areas, including food delivery, groceries, dine-out services, and the Hyperpure business. Today, Zomato controls more than 50 percent of India’s foodtech market, reinforcing its position as the dominant player in the sector.

“We are OW on Zomato as we believe: 1) the food delivery business is on a path to profit and margin expansion along with strong growth from under-penetration that provides a large total addressable market (TAM), 2) the Blinkit business has achieved breakeven at contribution margin (CM) and Ebitda level and should see continued strong growth even as margins remain flat, and 3) the Going Out business will be the “next big thing” and is already a profitable business,” said JPMorgan.

SBI Securities also remains positive on Zomato, praising its diverse business model and strong financial performance. The company’s key segments—food delivery, quick commerce, and B2B supplies through Hyperpure—are driving substantial growth. The acquisition of Blinkit in 2022 has broadened its B2C reach, and the burgeoning “Going-out” segment, which includes ticketing services for movies and events, adds further potential.

Stock Price Trend

Zomato's stock has rallied 161 percent in the last year and is up over 110 percent in 2024 YTD. The stock has given positive returns every month this year except May, when it shed 7.25 percent.

It hit its record high of ₹280 last month and is currently just 7 percent below its peak. However, from its 52-week low of ₹96.47, in September last year, it has soared 169.5 percent.

Investment Rationale

JPMorgan highlights Zomato's quick commerce business as a key driver of retail consumer transformation, especially in metro cities. After proving its model in the NCR, Zomato is scaling up rapidly. With Blinkit stores reaching profitability, the business is set to outpace competitors, prompting JPMorgan to raise Zomato’s FY25-27 forecasts by 15 to 41 percent. The food delivery segment is expected to grow by 20 percent, up from 15 percent, while the acquisition of Paytm’s ticketing business enhances monetisation. These factors led JPMorgan to increase Zomato’s valuation to ₹340, a 63 percent rise.

JPMorgan cut Zomato's EBITDA estimates in early 2024, citing Blinkit's rapid expansion, which required significant investment, slowing profit growth. The food delivery business also saw moderated margins due to the impact of the Zomato Gold subscription, which subsidised delivery charges. Additionally, a new ESOP plan introduced in May raised costs, further affecting EBITDA expectations.

However, JPMorgan's outlook on Zomato has improved, expecting Blinkit's revenue growth to rise from 70 percent to 80 percent in FY26 and food delivery growth to increase from 15 percent to 19 percent. Faster Blinkit growth, strong food delivery performance, and synergies from the Paytm ticketing acquisition have driven the sharp upward revision in EBITDA estimates.

JPMorgan noted key risks to Zomato’s rating, including potential market share losses to competitors, decreasing average order values affecting unit economics, disruptive competition from e-commerce giants and modern trade, regulatory changes impacting hyperlocal businesses, and macro factors like rising interest rates affecting valuation.

Meanwhile, SBI Securities is optimistic about Zomato’s diverse business model, strong brand, and solid financial performance, with key segments like food delivery (63 percent of sales), quick commerce (24 percent), and B2B supplies through Hyperpure driving growth. 

The Blinkit acquisition in 2022 expanded its B2C reach, while the growing “Going-out” segment, including ticketing services for movies and live events, adds further potential. Zomato reported a 74.1 percent YoY revenue increase in Q1 FY25 to ₹4,206 crore, alongside a net profit of ₹253 crore. The management expects GOV to grow over 20 percent in FY25 and plans to significantly expand Blinkit’s store network by FY25E/FY26E.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.