Blinkit's Growth Drives Goldman Sachs To Raise Zomato Target Price
The brokerage has raised the target price of the stock to Rs 240 from Rs 170 earlier, citing that the company is undervalued compared to its global and Indian peers.
Goldman Sachs has raised the target price for Zomato Ltd. due to growth in the order value of Blinkit, even as the brokerage projected moderate growth for the company's food delivery gross order value.
The brokerage has maintained its 'buy' call on Zomato, with the target price raised to Rs 240 apiece from Rs 170 apiece earlier, implying an upside of nearly 30%.
Despite Zomato's share price rising 219% in the last 12 months, the brokerage noted that the stock trades at 48-times FY26 price to earnings, or 0.9 times price to earnings growth, significantly lower than MSCI India/India consumer discretionary trading at 1.4x/3.2x PEG.
The brokerage also believes that the market is still underappreciating Zomato's growth and profit potential in the online grocery segment. "We are 17%/33% ahead on FY26 revenues/Ebitda for the segment vs. visible alpha consensus," it said.
The company's food delivery business already enjoys the highest Ebitda margin among global food delivery platforms, Goldman Sachs said. "We believe a similar construct should play out in quick commerce. We expect the quick commerce Ebitda margin to exceed that of food delivery over time," it said.
Supported by Goldman's new analysis of the potential market, economics and industry structure for quick commerce, the brokerage expects Blinkit, whose gross order value is 50% above the brokerage's estimates from a year ago, to continue delivering strong growth.
"We see an elevated growth profile for Blinkit at 53% FY24E-27E GOV CAGR, driving a 32% FY24E-27E adjusted revenue CAGR for Zomato, the highest within our global food delivery and India Internet coverage," it said.
The stock was trading 1.84% higher at Rs 188.25 as of 9:30 a.m., compared to a 0.15% advance in the Nifty 50. It has risen 51.29% on a year-to-date basis and 188.44% in the last twelve months.
The total traded volume on the NSE so far today was 0.18 times its 30-day average. The relative strength index was 56.86.
Out of 28 analysts tracking the company, 24 maintain a 'buy' rating and four suggest a 'sell', according to Bloomberg data. The average 12-month consensus price target implies an upside of 0.8%.