Zomato Q3 results: Revenues rise on-year, losses shrink aided by one-time gain
Losses narrow down: Zomato, online food delivery, reported a net loss of Rs 63 crore for the December quarter as against a net loss of Rs 352 crore for the year-ago period. The losses narrowed down sharply by a one-time gain of Rs 316 crore from its stake sale in Fitso. Fitso is an online platform that connects people to sporting venues. The loss for the September quarter was Rs 429 crore.
Revenue rise: Revenue from operation increased to Rs 1,112 crore in Q3FY22, a growth of 82% from Rs 609 crore in Q3FY21. Adjusted revenue increased by 78% to Rs 1,420 crore. Sequentially, adjusted revenue was flat. The revenue increased for the December quarter due to increased demand for restaurant meals.
EBITDA - Earnings before interest, tax, depreciation, and amortization loss came at (Rs 270 crore) in the December quarter compared to a loss of (Rs 310 crore) in the September quarter.
Zomato results: Highlights
Gross Order Value - Company's Gross Order Value (GOV) increased by 84.5% YoY and 1.7% QoQ and stood at Rs 5,500 crore for the Oct-Dec quarter. Sequentially, GOV increased by 2% due to a reduction in customer delivery charges and the soft impact of post-covid reopening. Contribution as a percentage of GOV for the food delivery business was 1.1% in Q3FY22 as compared to 1.2% in Q2FY22.
Number of orders: The number of orders increased 93% YoY and 5% QoQ while the Average Order Value decreased 3% sequentially mainly because of a reduction in customer delivery charge.
Cash in hand: The company said that it has $1.7 billion cash on its balance sheet and has no plans of raising fresh funds in near future. It will continue to spend in the core food business and quick commerce.
Zomato Results: Review
Zomato has reported decent numbers for the December quarter. Excluding Hyperpure Business, Zomato’s growth was just 4.1% QoQ for its Food Delivery, Dining Out & ME Delivery biz. This tepid growth came in a seasonally strong quarter due to festivities. The bottomline improved but it was on the back of a one-time sale. It also witnessed a sequential decline in Monthly Transactioning Users of 1.3% QoQ to 15.3 million.
Zomato Quarterly Results: Brokerage Radar
Given the persistent losses in the past and expected continuation of the cash burn soon the brokerage firm believes the company can compound its revenues by 10x over a decade but with modest profitability and cash generation and thus believe DCF valuation as an ideal tool to value real long term potential.
They have currently factored in Revenue CAGR of 27.4% (earlier 26.3%) over FY22-25E & 20.5% (earlier 20.9%) over FY26-30E in its hyper-growth stage with exit EBIT Margin of 22.1% (earlier 19.4%) in FY30e, Cost of Capital of 10.5% and terminal growth rate of 6%.
The average EBIT Margin stood at -30.9% (earlier -26.7%) & +7.4% (earlier +8.6%) over FY22-25E & FY25-30E respectively. Taking these assumptions, they have arrived at DCF based TP of Rs 75 per share (earlier Rs 90) and maintain a SELL rating on the stock. The stock price was 5.88% lower at Rs 88.90 per share on Friday morning.