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Investing.com - BofA Securities upgraded Zomato (NSE:ETEA) Limited (NSE:ZOMATO) from Neutral to Buy and raised its price target to INR350.00 from INR280.00 following the company’s first-quarter results.
The upgrade was driven by stronger-than-expected key performance indicators and positive commentary on Zomato’s quick commerce business, Blinkit, which demonstrated 26% quarter-over-quarter GMV growth and 40% revenue growth.
BofA Securities believes Blinkit is gaining market share and expects this momentum to continue as management plans to expand store count to 3,000 after reaching their initial 2,000 target, with management indicating that margins have bottomed and should improve going forward.
The research firm projects that Zomato’s move to IOCC (Integrated Online Command Center) could lead to approximately 1% improvement in Blinkit’s medium-term EBITDA margins, with steady-state margins potentially reaching 5-6% of NOV and ROCE of around 40%.
While food delivery growth remains slow for Zomato, BofA Securities notes this slowdown is already well-known to investors and expects medium-term growth to normalize to 18-20%.
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