UBS Celebrates Zomato's Stunning Q1 Earnings! Raises Price Target Above ₹300!

UBS Securities analysts are highly impressed by Zomato's strong earnings performance in the April-June quarter, which has reinforced their optimistic outlook on the stock's future potential. This confidence led the brokerage to raise its price target for Zomato by nearly 31%, bringing it to ₹320, and suggesting a potential upside of 21% from its previous closing price.

On August 16, Zomato share price rose by 1.7%, closing at ₹264.43 on the NSE.

UBS also reaffirmed its 'buy' recommendation on Zomato, highlighting the company's impressive 27% growth in its food delivery segment during Q1 FY25, alongside stronger-than-expected growth in Gross Merchandise Value (GMV) from its quick commerce division. UBS noted that both the growth and margin improvements in Zomato’s food delivery and quick commerce businesses exceeded their expectations.

This positive assessment coincides with a notable achievement in Zomato's quick commerce business, Blinkit. On Raksha Bandhan, Blinkit reached a record GMV, processing an impressive 693 Rakhi orders per minute at its peak, a milestone shared by CEO Albinder Dhindsa.

Moreover, Zomato recently announced a dramatic 126.5-fold increase in its net profit, reaching ₹253 crore in the April-June quarter. This surge in profitability was driven by increased platform fees for consumers and improved operational profitability from Blinkit.

Zomato’s revenue for the quarter soared by nearly 74% year-over-year, reaching ₹4,206 crore, up from ₹1,416 crore in the same period the previous year. The company also reported an EBITDA margin of 4.2%.

During the earnings call, management highlighted that Zomato has gained market share in several cities across Southern India, an area traditionally dominated by Swiggy, which is currently preparing for its IPO.

Buoyed by Zomato’s robust quarterly performance and optimistic management commentary, UBS increased its GMV projections for Zomato by 20-30% for quick commerce and 2-3% for food delivery over FY26-28. The brokerage praised Zomato's exceptional growth and margin expansion profile.

UBS also noted that Zomato is currently trading at an FY27 EV/EBITDA of 35 times, which is significantly lower than the average multiple of 30 times seen among Indian consumer and retail peers.

Similarly, Morgan Stanley recently reaffirmed its "overweight" rating on Zomato, setting a target price of ₹278 per share. The firm acknowledged the rising competitive pressure within the quick commerce sector, viewing it as a sign of the channel's growing importance. However, Morgan Stanley also warned that increased competition could delay Zomato's profitability in this segment.

Morgan Stanley analysts emphasized the importance of Zomato maintaining its market leadership, even if it means postponing profitability goals. They believe that leading the competitive landscape is crucial to Zomato's long-term success.

The firm also suggested that any short-term decline in Zomato's stock price due to increased competition could provide a strategic buying opportunity for long-term investors. Despite the challenges posed by a competitive market, Morgan Stanley remains optimistic about Zomato's future prospects.