Motilal Oswal's research report on Zomato
Zomato reported 4QFY23 revenue of INR20.6b, up 5.5% QoQ/70% YoY (in line with our estimates). Revenue growth was led by Blinkit (up 21% QoQ), while food delivery revenue growth was modest at +2% QoQ (GOV -2% QoQ) due to adverse seasonality and macro impact. Zomato’s food delivery vertical reported its second quarter of order volume decline (MOFSLe) as well as ~5% decline in users (MTUs) despite a strong response from Gold members (order frequency up 60% QoQ). Management guided for a high single-digit QoQ recovery in food delivery GOV growth in 1QFY24. Zomato’s 4QFY23 EBITDA margin (adj. EBITDA loss at 6.9% of revenue) was ahead of MOFSL (-10.4%) due to healthy cost control and higher take rate. Excluding Blinkit, Zomato turned EBITDA positive due to a sharp pickup in food delivery profitability (+5.1% adj. EBITDA margin). Blinkit’s adj. EBITDA loss narrowed (-9.9% in 4Q) on better take rate and store-level GOV growth. It guided for PAT breakeven on consolidated basis within next four quarters.
Outlook
We remain positive on the long-term growth opportunity for Zomato, and do not expect competition to intensify further despite the entry of ONDC in the space. Our DCF-based valuation of INR80/sh suggests a 24% upside from current price. We reiterate our BUY rating on the stock.
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