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Business News/ Markets / Stock Markets/  Zomato share price hits 52-week high, here's what driving the rally
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Zomato share price hits 52-week high, here's what driving the rally

Zomato's remarkable performance over the past year underscores its status as a multibagger stock, having surged by over 200 percent.

Zomato (REUTERS)Premium
Zomato (REUTERS)

Zomato shares experienced a notable surge of 6 percent during morning trading on February 12, reaching a fresh 52-week pinnacle of 158.80 on the National Stock Exchange (NSE). This surge propelled the stock closer to its record peak of 169, attained on November 16, 2021.

The upswing follows Zomato's impressive financial performance, with the Gurugram-based food aggregator reporting a consolidated net profit of 138 crore for Q3FY24, a significant turnaround from the net loss of 347 crore in the corresponding period of the previous fiscal year.

Also read: SJVN share price down 19% after 51% drop in Q3 net profit

A key driver behind this positive trajectory has been Zomato's enhancement of its contribution margin, a crucial profitability measure, which expanded to 7.1 percent in the December quarter. This improvement was attributed to the introduction of a platform fee for food deliveries.

As of 1:38 pm, the stock was trading 3 percent higher at 155.20 on the NSE. Zomato's remarkable performance over the past year underscores its status as a multibagger stock, having surged by over 200 percent. This stellar growth outpaces the benchmark Nifty, which has seen a comparatively modest increase of 21 percent during the same period.

Brokerage firm Elara Securities downgraded the stock to ‘Accumulate’ from ‘Buy’, while raising target price from 165 to 150. “We downgrade ZOMATO to Accumulate from Buy (stock has moved up by 50% in the last six months, largely factoring healthy growth and profitability) with raised SOTP-TP of INR 165 from INR 150, as we have raised the target one-year fwd. EV/EBITDA of food delivery to 50x (from 47x). Good execution on growth and profitability in the food/quick commerce businesses are key monitorables. We have assigned one-year fwd. EV/sales of 6x (unchanged) and 2.5x (unchanged) to Blinkit and Hyperpure, respectively," it said.

Also read: Small-cap stock Lagnam Spintex hits record high after Q3 results 2024. Jumps 17% despite weak stock market

As per analysis by brokerage company Motilal Oswal, the food delivery industry in India remains at an early developmental phase, offering significant potential for expansion in the future.

"With a dominant market share and strong growth in the food delivery business and Hyperpure, we expect Zomato to report a strong 38 percent Adjusted revenue CAGR over FY24-26," the brokerage said, reiterating its ‘Buy’ call on the stock.

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Published: 12 Feb 2024, 05:29 PM IST
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