Shares of food delivery giant Zomato were soaring by more than 3% in the exchanges on Tuesday as brokerages appeared bullish about the firm’s performance and see it maintaining its lead over competitor Swiggy.

What Happened: HSBC maintained its “buy” recommendation for the stock and increased its target price to ₹330. Zomato still has scope to improve take rates in its food delivery business even as competitive intensity seems to be stabilising, the brokerage said.

In the quick commerce business, HSBC said Swiggy is struggling to keep pace with Blinkit but added that the latter had scope to expand take rates and margins in the business.

Motilal Oswal said Zomato showed a better performance in most metrics when compared to Swiggy. Zomato has continued to gain market share from Swiggy from FY22 to 1QFY25, aided by its stronger execution, the brokerage noted. Its market share has grown from 54% in FY22 to 58% in 1QFY25.

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Zomato has a higher average monthly transacting users (MTU), around 2 crore compared to Swiggy’s 1.4 crore. The former’s food delivery business has become stable, showing consistent growth in gross order value (GOV) and predictable profitability whereas Swiggy's food delivery business has just broken even, Motilal Oswal said.

Talking about its quick commerce business, the brokerage noted that Blinkit is ahead of Instamart in terms of take rates, average order value (AOV) and profitability. Motilal Oswal had a “buy” rating on the stock with a target price of ₹320.

Kotak Securities expects Zomato to show strong performance in Q2 FY25, supported by a 23% year-over-year increase in food delivery gross merchandise value (GMV) and a 114% year-over-year rise in Blinkit GMV. The brokerage anticipates Zomato’s food delivery GMV to stand at around ₹9,800 crore, representing a 23% year-over-year increase and a 6% quarter-over-quarter rise. It also sees a 20 basis points quarter-over-quarter expansion in contribution margin (CM) due to a rise in platform fees.

For Blinkit, Kotak projects a 20% quarter-over-quarter growth in GMV for Q2 FY25, with CM reaching 4.3%. The brokerage retained its “buy” rating on the stock with a target price of ₹315.

Price Action: Zomato gained 3.42% to trade at ₹275.20 on Tuesday.

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