Zomato Shares Surge 4%; Here Is What Brokerages Say After Q1 Results

Zomato, an online meal delivery service, posted a net loss of 360.7 crores for the quarter ended June 30 on Tuesday. The previous fiscal's similar period resulted in a net loss of 99.8 crores for the corporation. In early trading on Wednesday, Zomato shares were trading almost 4% higher on the BSE, at 129 per share.

Following last month's blockbuster initial public offering, the food-tech business released its first earnings report.

According to Deepinder (Founder & CEO) and Akshant (CFO), "The majority of revenue growth came from our core food delivery service, which grew despite the severe COVID outbreak that began in April. COVID, on the other hand, had a considerable impact on the dining-out industry in Q1 FY22, reversing the majority of the gains earned in Q4 FY21."

In Q1 FY22, India's food delivery GOV increased by 37% year on year to INR 45.4 billion ($605 million), up from INR 33.1 billion ($442 million) in Q4 FY21 (at 1 USD = 75 INR).

Here Is What Brokerages Say After Q1 Results

Jefferies

According to Jefferies, Zomato posted a big revenue beat, powered by a +37 percent quarter-on-quarter (QoQ) increase in GOV (gross order value). "While the delivery industry remained strong, the second Covid wave had an impact on dining out." Given the impact of the first Covid wave in the base, YoY statistics are very robust," it stated. The company is rated Buy by the firm, with a target price of Rs 175 per share (up from Rs170).

"Following a successful first quarter, we are raising our revenue expectations for FY22-24 by about 10%-20%, principally due to increased GOV (which in turn are based on higher MTUs). We have increased our EBITDA loss forecasts, but we still expect break-even in FY25-26. We've also changed our model structure to account for ESOP charges separately from now on, and we've raised this," Jefferies noted.

Dolat Capital

"Zomato's meal delivery business is displaying great growth traction," according to Dolat Capital. Despite this strong gain in volume and pricing, the company saw a decrease in Contribution/order throughout the quarter. The drop in contribution in Q1 was ascribed to a "costlier business climate in the sector," which Zomato believes is partly attributable to increased variable costs (fuel costs) and a rise in overall delivery availability costs." The stock has a Sell rating and a target price of Rs 90 per share.