Motilal Oswal Initiates Coverage On This Midcap Services Stock With "Buy", Sees 30% Returns

Motilal Oswal has come up with a "Buy" recommendation on Zomato Ltt., a services sector company engaged in food delivery. The brokerage assigns a target price of Rs 70/share on the stock with a "Buy" call. Considering the given target price, if you buy the stock at the current market price, it can fetch up to 30% gains. The market valuation of the stock is Rs 45.880.11 crore.

Zomato's stock outlook & performance

The stock is currently trading at Rs 53.35/share, down 1.11% from the previous close. It recorded the 52 week high on 18 April 2022 at Rs 84.40/share and 52 week low on 27 July 2022 at Rs 40.60/share, respectively.

The stock has fallen 1.3% in the past 1 week, and 3.01% in the past 1 month, respectively. In 3 months, it has given 4.41% positive return. In the past 1 year, it has given 35.77% positive return.

Valuation and view: Initiate coverage with a BUY rating

Motilal Oswal said, "The food delivery business is still at a nascent stage in India with a long runway of growth. With dominant market share and strong growth in the food delivery business and Hyperpure, we expect Zomato to report a strong 29% CAGR over FY23-25. Though management expects it to be profitable latest by 2QFY24, we believe the company should breakeven during FY25. We view the acquisition of Blinkit as an additional risk and high attrition at senior management level remains a concern."

It added, "We value the business using DCF methodology, assuming 4% terminal growth rate and 12.5% cost of capital. We initiate coverage on the stock with a BUY rating and a TP of INR70, implying 30% potential upside."

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