Zomato’s share price was upbeat on Friday morning after a global brokerage firm raised its target price on the stock by 41%.

What Happened: Goldman Sachs maintained its “buy” rating for the stock raising the target price to ₹240 from ₹170. The revised target implies an around 30% upside from the stock’s last closing price of ₹184.75.

The brokerage in its latest report suggests that Zomato’s quick commerce arm, Blinkit, is now more valuable than the food delivery business. The report estimates Blinkit’s implied value at ₹119 per share or about $13 billion while valuing Zomato’s food delivery business at ₹98 per share.

The surge in Blinkit’s valuation is attributed to its strong growth potential in India’s fast-growing quick commerce market. Goldman Sachs forecasts Blinkit’s gross order value (GOV) to grow at a compound annual growth rate (CAGR) of 53% between FY 2024 and 2027.

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The report indicates that Blinkit is expected to achieve EBITDA breakeven by the June quarter of 2024 and generate a higher EBITDA margin than Zomato’s food delivery business by FY2030.

As per the analysts, several factors contribute to the growth prospects of India’s quick commerce market, including the large unorganized grocery sector, high population density in urban areas, and favourable delivery costs to the average order values ratio.

Goldman Sachs estimates India’s addressable quick commerce market in the top 50 cities alone to be $150 billion as of 2023.

Price Action: Zomato’s share price was up 3% to trade at ₹188.40 in the early hours of trading on Friday.

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