Zomato's Higher Gross Order Value, Blinkit Business Growth Have Analysts Optimistic

Zomato Ltd. continues to hold its edge in India’s highly competitive food delivery and quick commerce markets, with two brokerages reaffirming their confidence in the company's growth potential. HSBC Global and Kotak Institutional Equities have both maintained their 'buy' ratings on Zomato, highlighting the company’s robust performance.

HSBC has raised its target price, reflecting optimism around the company's diverse growth strategy.

The upbeat assessments from both the brokerages come as Zomato is investing in diversifying its business with new ventures such as its 'going out' and entertainment ticketing services, which HSBC values at around $1 billion.

Both brokerages warn of risks related to increased competition and capital allocation, but the overall outlook remains positive. With Zomato's strong performance and growth potential in key markets, it appears well-positioned to maintain its lead over Swiggy, while continuing to expand its quick commerce business through Blinkit.

HSBC Global raised its target price for Zomato to Rs 330 per share, up from Rs 260 and an upside of 19.9%, driven by optimism around the company’s expanding footprint in food delivery and quick commerce. 

The brokerage noted that "Zomato has a lead over Swiggy in both food delivery and quick commerce", boasting an active user base 45% larger and a Gross Order Value that is 35% higher. Zomato has seen impressive GOV growth of 23% CAGR between fiscal 2022-24, outpacing Swiggy’s 16% growth.

While Zomato already leads in user engagement and order frequency, HSBC sees further upside potential in profitability. 

Zomato's take rates—the percentage of transaction value it earns from each order—are still 100 basis points lower than Swiggy’s, offering room for improvement as competition stabilises. The report also noted the impact of Zomato’s loyalty program, Zomato GOLD, which has boosted order frequency in recent quarters.

In the rapidly growing quick commerce sector, Zomato’s subsidiary Blinkit has also been a standout performer. The brokerage noted that Blinkit has outpaced Swiggy’s Instamart, adding more dark stores while maintaining higher order volumes. 

Blinkit operates 639 dark stores, 58 more than Instamart, and expects to reach 1,000 stores by fiscal 2025, solidifying its market lead. HSBC expects Blinkit to maintain its edge with stronger take rates and contribution margins compared to Instamart, which lags behind in store expansion and order size.

Kotak Institutional Equities echoed this sentiment, reaffirming its 'buy' rating and target price of Rs 315 per share. The brokerage anticipates Zomato’s food delivery business to grow its Gross Merchandise Value by 23% year-on-year in the second quarter of fiscal 2025, with a notable boost in margins due to higher platform fees and operational efficiencies. Zomato has implemented a platform fee of Rs 6 per order, which Kotak expects to drive profitability further.

For Blinkit, Kotak forecasts a staggering 114% YoY growth in GMV, along with an improvement in contribution margins. However, it cautioned that the aggressive addition of stores could put pressure on Blinkit’s Ebitda in the short term. 

Zomato Ltd. stock rose as much as 2.78% during the day, before paring some gains to trade 2.16% higher at Rs 271.85 apiece, compared to a 0.28% advance in the benchmark Nifty 50 as of 10:22 a.m. 

It has risen 162.95% in the last 12 months and 119.97% on a year-to-date basis. Total traded volume so far in the day stood at 1.0 times its 30-day average. The relative strength index was at 50.63.

Of the 27 analysts tracking Zomato, 24 have a 'buy' rating on the stock and three suggest a 'sell', according to Bloomberg data. The average of 12-month analysts' price targets implies a potential upside of 5.1%.