Zomato’s shares soared to a new record on December 5, crossing the ₹300 mark for the first time and touching an all-time high of ₹304.65 during intraday trading. This remarkable surge of 6.4% also boosted the company’s market capitalisation to nearly ₹3 lakh crore. The stock has been on a one-way bull run since March 2023, delivering an astonishing 496% return.
Key Developments Behind the Surge
Zomato's recent rally can be attributed to several positive factors:
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Brokerage Upgrades:
- CLSA: Maintained an 'Outperform' rating with a revised target price of ₹370 per share, citing strong growth in food delivery and quick commerce.
- Nomura: Raised its target price from ₹280 to ₹320, maintaining a 'buy' rating and highlighting the company’s plans to quadruple store density by December 2026.
- Axis Securities: Set a target price of ₹350, emphasizing improved profitability in Blinkit and Hyperpure divisions.
- Inclusion in BSE Sensex: Zomato is set to join the BSE Sensex on December 23, 2024, as part of the index reconstitution by Asia Index Private Ltd.
- Entry into F&O Segment: The stock’s inclusion in the Futures and Options (F&O) segment has further strengthened its market position.
Fundraising and Expansion Plans
Zomato recently raised ₹8,500 crore through a Qualified Institutional Placement (QIP), issuing 33.64 crore shares at ₹252.62 each. The funds will primarily be used to expand Blinkit, its quick-commerce arm, and replenish cash reserves, which have dipped from ₹14,400 crore in FY21 to ₹10,800 crore in FY25 due to investments and acquisitions.
Strong Financial Outlook
Brokerages predict robust growth for Zomato in the coming years:
- Axis Securities: Forecasts revenue, EBITDA, and APAT CAGRs of 25%, 60%, and 55%, respectively, from FY25E-FY28E, driven by volume growth and better realisations.
- Expansion plans include increasing Blinkit’s store count to 2,000 by 2026, enhancing market presence and efficiency.
Exceptional Returns Over 21 Months
Since March 2023, Zomato's shares have risen from ₹51 to ₹304, marking a 496% increase. The stock has ended 18 of the past 21 months in the green, with its largest monthly gain of 27.25% in April 2023. In CY23, Zomato shares gained 108.6%, followed by a 142% surge so far this year.
Conclusion
Zomato’s stellar performance highlights its strong market position, strategic expansion in quick commerce, and consistent profitability improvements. With increasing investor confidence and ongoing developments, Zomato remains a key player to watch in the stock market.
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