Can Zomato share price jump post Q2 earnings: What analysts’ say

Zomato reported its Q2FY23 numbers last week. The losses have narrowed year on year. The shares have rallied about 8% in the last 3 sessions post the earnings release. Here’s a closer look at Zomato’s earnings, and what analysts have to say. 

View Zomato share price

Key highlights from Zomato Q2FY23 results:

• Net profit/loss: Loss of Rs 250.8 crore from a loss of Rs 435 crore last year
• EBITDA loss at (Rs 190) crore, compared to a loss of (Rs 150) crore in Q1FY23

Zomato Revenue Details→

Let us look at Zomato Q2FY23 numbers in detail:

Losses narrow: Zomato, online food delivery, reported a net loss of Rs 250.8 crore for the September quarter, as against a net loss of Rs 434.9 crore in the year-ago period. The losses have increased sequentially.

Revenue increases: Revenue from operation increased to Rs 1661.3 crore in Q2FY23, a growth of 62.20% from Rs 1024.2 crore in Q2FY22. Sequentially, adjusted revenue increased by Rs 1413.9 crore. This is the first quarter where the company has crossed the billion-dollar annualized revenue mark.

EBITDA: Earnings before interest, tax, depreciation, and amortization loss increased to (Rs 192) crore in the September quarter compared to a loss of Rs (150) crore in Q1FY23. The EBITDA loss increased on account of the consolidation of quick commerce losses.

Gross Order Value: Company's Gross Order Value (GOV) increased 23% on-year and stood at Rs 1482 crore for the July-Sep quarter. GOV growth was driven by growth in both order volumes and average order value. Growth in revenue per order led to higher adjusted revenue growth of 8% sequentially and 27% YoY.

Other important numbers: Contribution margin (as a percent of GOV) improved from 2.8% in Q1 to 4.5% in Q2. As a result, the food delivery adjusted EBITDA hit break-even in Q2. Average monthly transacting customers grew 4.4% QoQ to 17.5 million in Q2FY23 as compared to 16.7 million in Q1FY23.

Hyperpure Update: Hyperpure is a business segment of Zomato that allows restaurants to buy everything from vegetables, poultry, meats, fruits, groceries, and seafood to dairy and beverages. 

Hyperpure revenue grew 23% sequentially, and 199% year-on-year to Rs 334 crore in Q2FY23. Adjusted EBITDA loss increased to Rs 53 crore from Rs 44 crore in Q1FY23, while the margin remained flat sequentially at -16%. Quick commerce is turning out to be another opportunity for Hyperpure, which began supplying to the sellers on Blinkit’s marketplace post-acquisition of Blinkit. This has the potential to further accelerate revenue growth for Hyperpure going forward.

Blinkist's Business update: For Blinkit, the number of orders increased from 22.2 million to 26.1 million Q2FY23. The average order value (AOV) was Rs 568, a growth of around 7.5% sequentially. Average monthly transacting customers increased to 2.6 million in the September quarter from 2.2 million previous quarter.

The revenue increased from Rs 164 crore in Q1FY23 to Rs 236 crore in the September quarter. Adjusted EBITDA losses narrowed to Rs (259) crore in Q2FY23 from Rs (326) crore in the previous quarter.

Zomato share price: Analysts' view

ICICI Securities: It believes that the management’s guidance towards attaining EBITDA-breakeven for Zomato business by Q1FY24 would require careful calibration of employee expenses and marketing spending. They estimate an EBITDA margin of -1.3% for FY24E. Hyperpure business is likely to benefit from growth in the overall segment. The brokerage has a HOLD rating on Zomato with a DCF-based target price of Rs 65.

Bank of America Securities: It remains neutral on the stock with a target price of Rs 67. The brokerage believes that the company reported better-than-expected core business growth and is balancing growth and profitability.

Credit Suisse: It raised its target price to Rs 100 and said Q2 profitability was improving well ahead of estimates while growth remained steady. There was a key surprise sharp improvement in the food delivery contribution margin to 4.5% of GOV. They upgraded overall EPS by 48%/60%/102% for FY23/24/25.