Zomato Best India Consumer Tech Monetization Play, JP Morgan Says; Lifts Target Price

J.P. Morgan said foodtech company Zomato Ltd. is best India consumer tech monetization play and raised the Overweight-rated stock’s target price to 340 rupees from 208 rupees per share.

Zomato started off as a restaurant search-and-discovery platform, but then ventured into food delivery, grocery, dine-out and hyperpure businesses, the global brokerage said in an investor note.

The company, with a market share of over 50%, is spearheading a rapid retail consumer transformation via its convenience and selection-focused quick commerce business with ambitious rollout plans, it added.

J.P. Morgan said Zomato is going deeper across all metros having proven the model in National Capital Region (around 50% of Gross Order Value and store count) and scale should help it drive monetization from channel margins and ad spending.

With the bulk of stores now crossing positive Dark Store level thresholds, incremental store economics should turn more positive on EBITDA, giving the company’s quick commerce arm Blinkit (formerly Grofers) the license to scale faster than peers and current targets, it noted.

“We expect it to lead the disruption of modern trade and ecommerce and raise our forecasts over FY25-FY27 by 15%-41%,” the brokerage said.

The food delivery has matured on business model (not growth), which should see continued expansion in profits, but is likely to stretch the growth envelope, J.P. Morgan said, as it lifted medium term growth to 20% from 15%, given consistent supply creation.

The brokerage said it also builds a bigger “Going Out” business combining core dining with new ticketing business adding to the monetizability of its monthly transacting users’ universe.

“This drives our valuation for Zomato up 63% to 340 rupees,” it added.

J.P. Morgan is Overweight on Zomato as it believes:

• The food delivery business is on a path to profit and margin expansion along with strong growth from under-penetration that provides large total addressable market.

• The Blinkit business has achieved breakeven at contribution margins and EBITDA level and should see continued strong growth even as margins remain flat.

• The Going Out business will be the “next big thing” and is already a profitable business.

Zomato closed at 242.85 rupees on the National Stock Exchange in Mumbai trading yesterday.

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