Zomato's Target Price By Jefferies Projects 23% Upside In Stock

Jefferies India Pvt. retained its price target of Rs 335 per share for Zomato Ltd. in a note released on Sept. 12., while suggesting a potential upside of 23% over the stock's closing price on Sept. 11. While, from Thursday's close, the target price implies an upside of around 17%.

The brokerage had earlier issued a base case target of Rs 335 for the food delivery aggregator in a note issued ahead of the market hours on Sept. 9.

According to Jefferies, the food delivery industry has reached a steady state, from a market structure and industry growth standpoint. With 60 million users already, the user base is likely to grow at a modest pace annually, it said.

Zomato's gross order value is likely to ramp up at 20% CAGR in the medium term led by "expanding use cases and increasing restaurant choices", the note stated.

Restaurant take rates have been largely optimised, with ad income at 4%, it said, adding that margins should improve steadily to 4-5% of the gross order value.

In the short term, the the company's business "might need investments and cash burn", Jefferies suggested.

The growth outlook for Blinkit, Zomato's quick commerce arm, "remains strong" as reflected in the 2,000-store guidance by December 2026 as compared to 639 stores in June 2024, the brokerage said.

Quick commerce has done a "better job of expanding organised retail versus modern trade format, and Blinkit could be bigger than leading retailers in India in medium term," it added.

The dark stores operated by the company could eventually expand to service up to 4,000 orders per day as compared to 1,560 orders being serviced currently, the note stated.

However, competition within the quick commerce sector may emerge as an issue for the company "in the short-term". There may be "irrational behavior, which may put some pressure on growth and margins", it further said.