Stock Tips Zomato premium valuation here to stay Jefferies initiates coverage check rating target price

Stock Tips: Do not be afraid of high valuation of Zomato, investment advice in Zomato at this target price

Analysts at global brokerage and research firm Jefferies have started covering Zomato and have given it a ‘buy’ rating at a target price of Rs 170.

Stock Tips: Since its excellent listing in the stock market, Zomato has given consistent profits to the investors. Some investors are confused about further investment in it that due to its high valuation, its price should not fall further. However, analysts at global brokerage and research firm Jefferies have started covering it and have given it a ‘buy’ rating at a target price of Rs 170. The price for Zomato’s IPO was fixed at Rs 72-76 per share and its listing was done at Rs 115 per share. After this, its shares have remained bullish and currently its shares are at Rs 135 per share with a jump of 78 per cent against the IPO price of Rs 76.

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Break even situation will be made by 2023

According to Jefferies, Zomato’s revenue is expected to grow at a compounded annual rate of 45 per cent by FY 2021-FY 2026, driven by rapid growth in food delivery and growth in other segments. Zomato is currently incurring business losses but Jefferies estimates that by the financial year 2025-26, there may be a situation of EBITDA break even. According to the brokerage firm, if the focus of Zomato remains on growth, then profits will increase. According to Jefferies, the EBITDA of the company is estimated to be Rs 800-1100 crore in the current financial year / post-Corona epidemic and in this the break-even situation may come by FY 025-26.

Break-even is the state in which there is no profit and no loss for the company. However, according to Jefferies, the PBT (Profit Before Tax) break-even may happen earlier due to the high availability of cash. According to Jefferies, there is a cash of $ 200 million (Rs 14.88 thousand crore) in Zomato’s book. The company operates on an asset-light model and has low working capital and capital expenditure requirements.

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Zomato also offers other services

Apart from food delivery, Zomato also offers a subscription service called Zomato Pro and Hyperpure, an ingredient supply business. According to Jefferies, Hyperpure’s revenue is expected to grow at 55 per cent CAGR (Compound Annual Growth Rate) by FY 2021-2026, while Zomato Pro’s revenue is expected to grow faster from the next financial year itself. According to brokerage and research firm Jefferies, Zomato can invest the cash available with it aggressively. According to Jefferies, challenges remain in front of Zomato regarding the third wave and increasing competition.
(Article: Kshitij Bhargava)

(The stock recommendations given in the story are those of the respective research analysts and brokerage firms. Financial Express Online takes no responsibility for the same. Investments in capital markets are subject to risks. Please consult your advisor before investing.)

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