Home / Markets / Stock Markets /  Should you buy, sell or hold Zomato shares post Q1 results? What brokerages say

Online food delivery platform Zomato on Tuesday reported widening of its net loss to 360.7 crore for the quarter ended on June 30. The company had posted a net loss of 99.8 crore for the corresponding period of the previous fiscal. Shares of Zomato were trading over 3% higher to 129 per share on the BSE in early deals on Wednesday. The food-tech company had reported its first earnings release after last month’s blockbuster initial public offering (IPO).

Revenue from operations and delivery charges rose to 1,160 crore for the first quarter from 920 crore in the year earlier. “Adjusted Ebitda loss was 170 crore in Q1 FY22 as compared to 120 crore in Q4FY21. The loss for Q1FY22 reported in our financial statements is 360 crore as compared to the adjusted Ebitda loss of 170 crore. This is largely on account of non-cash ESOP expenses, which have increased meaningfully in Q1FY22 due to significant ESOP grants made in the quarter pursuant to the creation of a new ESOP 2021 scheme," Zomato chief executive officer (CEO) Deepinder Goyal said in a statement.

Those at Jefferies said that Zomato reported a strong beat on revenues led by +37% quarter-on-quarter (QoQ) in GOV (gross order value). ''While delivery business was strong, dining-out was impacted by the second Covid wave. YoY numbers are very strong given the impact of first Covid wave in the base,'' it said. The brokerage has a Buy rating on the stock with the target price of 175 per share (from 170).

''Following a strong 1Q, we raise FY22-24 revenue estimates by around 10-20%, primarily based on higher GOV (which in turn are based on higher MTUs). We also raise our EBITDA loss estimates but continue to see break-even by FY25-26. We have also made changes in our model structure to separately account for ESOP charge from here-on and have also raised this,'' Jefferies note added.

Another brokerage Dolat Capital said, ''Zomato’s food delivery biz is showing strong growth traction.. However, despite this robust growth both in terms of volume and pricing the company actually witnessed contraction in Contribution/order during the quarter. Zomato has attributed decline in contribution in Q1 due to “costlier business environment in the lockdown" which we believe is partially might be on account of higher variable cost (fuel cost) and increase in overall delivery availability cost.'' It has a Sell rating on the stock with target price of 90 per share.

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