Continuing its golden run, Zomato‘s share price went up around 3% to hit a new all-time high of ₹180. But, analysts at ICICI Securities think the food giant is set to continue this run for a bit longer.

The Zomato Analyst: Abhisek Banerjee-led analyst team at ICICI Securities maintained the “buy” rating for the stock raising the target price by 64% to ₹300 from ₹182. The new target indicates an around 72% upside from the stock’s last closing price of ₹174.20.

The Zomato Thesis: According to the analysts’ projections, the food delivery market is poised to expand at a CAGR exceeding 20% YoY, reaching a remarkable $40 billion (around ₹3.2 lakh crore) by FY33, compared to the estimated $7 billion (around ₹57,400 crore) in FY24.

As per the brokerage firm, Zomato’s food business gross order value (GOV) can sustain a growth rate exceeding 20% YoY until FY33, even without significant gains in market share. This realisation has led ICICI Securities to revise their earlier estimations, now projecting a higher food GOV CAGR of 21.1% YoY for FY24-33, up from the previously anticipated 15.3% YoY.

Consequently, their outlook on food delivery revenue CAGR for FY24-33E has been revised upwards from 17.0% YoY to an impressive 22.3% YoY. They anticipate that food delivery EBITDA margins will stabilize at approximately 6% of GOV. Moreover, they expect ad revenues to be a key driver in increasing food delivery take rates over the medium term, potentially reaching a stabilization point of around 21%, thereby driving up contribution margins to 8.5%.

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Turning to the burgeoning quick commerce market, ICICI Securities forecasts a robust CAGR exceeding 29% YoY, propelling it to $36 billion by FY33 (around ₹2.9 lakh crore), from an estimated $3.6 billion (around 29,500 crore) in FY24. The analysts anticipate a GOV growth rate exceeding 29% YoY until FY33, necessitating a revision in their projections from a previously estimated 24.2% YoY to 29.1% YoY for FY24-33. Consequently, their revenue CAGR for Blinkit has been adjusted upward from 25.9% YoY to 31.1% YoY for FY24-33.

Expectations are that Blinkit’s EBITDA margins will stabilize at approximately 4.8% of GOV, with considerable potential for improvement in take rates driven by ad-revenue growth and mix enhancement, as highlighted by the company itself.

ICICI Securities also underscores the evolving market dynamics, noting the establishment of a “duopoly of scale” in the food delivery sector, with Zomato being a prominent player alongside its competitor, Swiggy.

Despite the recent run-up in Zomato’s share price, ICICI Securities maintains a positive outlook, citing compelling risk-reward dynamics. The analysts envision a bullish scenario where the stock could trade at ₹350 per share and a bearish scenario with an ₹128 per share valuation, indicating an attractive risk-reward skew of 3.9:1 to the upside.

Price Action: Zomato’s share price was up 2.93% to trade at ₹179.30 in the late hours of trading on Tuesday.

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