ICICI Securities observed that Zomato's shift in focus from penetration-led gains in food delivery to increasing its power users augurs well for profitable growth.

The Zomato Analyst: The analyst team at ICICI Securities led by Abhisek Banerjee, upgraded their rating for the stock from ‘hold' to ‘buy' maintaining their target price of ₹65.

The Zomato Thesis: Zomato's gross order value (GOV) for the food delivery business grew 0.7% quarter-over-quarter and 21.5% year-over-year in Q3FY23 to ₹6,680 crore. Monthly transacting customers remained ‘largely stable' at 17.4 million. Adjusted revenue for the food delivery business was around ₹1570 crore down 1% QoQ and up 30.4% YoY. 

The brokerage firm noted that these numbers were largely in line with its estimates.

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Talking about Hyperpure, the company's B2B initiative, analysts noted that the 163% YoY growth in the December quarter was in line with their thesis around strong growth in B2B e-commerce over the next 2-3 years. 

On Blinkit, the company's quick commerce brand, analysts said that its adjusted revenue of ₹300 crore was in line with their estimate. In their research note, the firm highlighted that Blinkit reported a 21.1% QoQ improvement in the number of orders, but the average order value declined by 2.6% QoQ. 

The brokerage firm said that the food delivery giant's underlying operating metrics showed sustained improvement, as they upgraded the stock's rating to ‘buy.'

However, the analysts acknowledged that further slowdown in growth poses a risk to their FY24E/FY25E estimates, but noted that at the current market price, the risk-to-reward odds are favourable. 

Price Action: Zomato shares were down 2.63% at ₹51.90 in the mid-market hours on Monday.

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