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Global brokerage firm UBS has expressed confidence in Zomato's future prospects by raising the share price target to Rs 320, a substantial increase from its previous target of Rs 260. This optimistic outlook comes alongside a maintained 'buy' recommendation, signaling UBS's belief in the company's growth potential. The rationale behind this bullish stance stems from projections of a 2-3 per cent increase in Zomato's gross merchandise value (GMV) and a significant 20-30 per cent surge in its quick commerce segment. This anticipated growth is attributed to the strong performance witnessed in the first quarter of the current financial year, coupled with robust guidance for the coming months.
The announcement of the increased price target triggered a positive reaction in the market, with Zomato's shares climbing by 6 per cent to reach Rs 280 on the BSE. However, this initial enthusiasm was followed by a period of profit-booking, resulting in a subsequent decline in share prices. As of 1405 IST, Zomato's shares had edged up by 0.1 per cent, trading at Rs 264.8 on the BSE.
The positive sentiment surrounding Zomato's growth is further reinforced by the strong performance of its quick commerce subsidiary, Blinkit. Ahead of the festival of Raksha Bandhan, Blinkit achieved a record-breaking GMV, demonstrating the significant demand for its services. Blinkit CEO Albinder Dhindsa highlighted the impressive order volume, revealing that the company processed an average of 693 rakhi orders per minute at its peak. This surge in demand underscores the increasing popularity of quick commerce and its potential to drive Zomato's overall performance.
UBS's 'buy' call is predicated on its forecast that Zomato will continue its robust growth trajectory in both its core food delivery business and the burgeoning quick commerce sector. The brokerage firm acknowledges that Zomato's investments in building supply for quick commerce may initially impact profit margins, but anticipates a positive long-term return on these investments. Zomato's recent financial performance, characterized by a significant surge in revenue and a remarkable leap in net profit, provides further validation for UBS's optimistic outlook.
Source: UBS Raises Zomato's Share Price Target to Rs 320, Maintains 'Buy' Call