Shares of Zomato have been under a bit of pressure ahead of the release of its March quarter results scheduled for May 13. In the last five days, the stock has gone down around 4%, but analysts at Emkay Global are strongly bullish on the tech giant.

The Zomato Analyst: The Dipesh Mehta-led analyst team at Emkay Global maintained its “buy” rating for the stock raising the price target to ₹230 from ₹170. The revised target implies an around 20% upside from the stock’s current market price of around ₹190.

The Zomato Thesis: The brokerage firm in its note said that Zomato’s food delivery business’s gross order value (GOV), which grew by 20.5% in the first nine months of FY24, following a period of muted growth in the preceding three quarters. Analysts attributed this growth momentum to factors such as the steady increase in monthly transacting users (MTUs) and ordering frequency, as well as the benefits derived from the addition of new restaurants to the platform, leading to improved take rates.

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The brokerage also pointed out the growing prominence of Quick Commerce (QC) companies among Indian consumers, especially urban digitally native demographics such as GenZs and millennials. This demographic segment has embraced the convenience of ordering everyday essentials across various product categories through mobile apps, with delivery times measured in minutes rather than hours.

Emkay highlights the positive impact of a growing customer base and increased frequency of transactions (repeat transactions) on profitability. Blinkit, Zomato’s quick commerce arm, has maintained industry-leading average order value (AOV) through factors like enhanced SKU availability, efficient order fulfilment rates, better customer insights, and effective execution, all contributing to improved profitability, the analysts added.

The brokerage firm has adjusted its revenue estimates by 0-2% and profit/EPS estimates by 42-53% for FY25/26E. Earlier in the week, Kotak Securities also shares its upbeat stance on the stock. The brokerage has a “buy” rating for the stock with a target price of ₹230.

Price Action: Zomato’s share price was down 1.20% to trade at ₹192.90 shortly after market open on Friday.

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