Zomato m-cap pips that of Tata Motors, Bajaj Auto; analysts stay bullish

Zomato, whose shares closed 1.18 per cent lower on Thursday at Rs 288.45 per share, has an mcap of Rs 2.78 trillion, according to BSE data.

By comparison, Tata Motors’ mcap stood at Rs 2.74 trillion, while Bajaj Auto’s was Rs 2.5 trillion on the BSE.

Tata Motors ended 1.5 per cent weaker on Thursday at Rs 744.3 per share, while Bajaj Auto’s shares gained 0.2 per cent to close at Rs 8,972.5 per share.

The S&P BSE Sensex, on the other hand, fell 964 points, or 1.2 per cent, to close at 79,218.

So far in calendar year (CY) 2024, Zomato’s share price has more than doubled investors’ wealth, soaring 135 per cent from Rs 124 per share at the end of CY 2023.

The shares reached their all-time high of Rs 304.5 on December 5, 2024.

Tata Motors shares, meanwhile, have dropped around 2 per cent this year, while Bajaj Auto shares have risen roughly 32 per cent.

The BSE benchmark has generated a return of 9.6 per cent during the period.

In a report last month, analysts at Morgan Stanley said Zomato’s stock could be a “potential doubler in three to four years”.

The brokerage raised the stock’s target price to Rs 355 but retained its ‘overweight’ rating.

“On a consolidated basis, our price target now implies an enterprise value (EV)/adjusted earnings before interest, tax, depreciation, and amortisation (Ebitda) multiple of 62x on 2026-27 estimated (FY27E) adjusted Ebitda, which would imply an EV/adjusted Ebitda to adjusted Ebitda compound annual growth rate (CAGR) of 1.7x,” the brokerage said.

Individually, it values the food delivery business at 32x on FY27E adjusted Ebitda earnings (base case), 30x (bear case), and 35x (bull case), implying an EV/adjusted Ebitda to adjusted Ebitda CAGR ratio of 1.4x-1.5x.

It values the qcom business using a 2030-31 estimated (FY31E) adjusted Ebitda multiple of 25x for the bear case, 36x for the base case, and 41x for the bull case, implying an EV/adjusted Ebitda to adjusted Ebitda CAGR ratio of 1.4x.

According to Morgan Stanley analysts, Zomato is well positioned among the key players to leverage the booming qcom industry.

It expects Zomato to maintain around 40 per cent market share in the qcom industry, which, according to the brokerage, could be worth $6.8 billion by the end of CY 2024.

Morgan Stanley further sees the industry growing to $42 billion by CY 2030 (base case) and $55 billion (bull case).

However, as near-term competition intensity could remain high, Morgan Stanley forecasts the company will remain at adjusted Ebitda breakeven for slightly longer than one to two quarters.

“We are revising our qcom gross order value and revenue estimates higher for FY27 by 25-34 per cent.

"We are also factoring in higher investments in the next 12 months, pushing our profitability assumptions back by 12 months.

"This drives cuts to our FY27 adjusted Ebitda estimates, but we expect adjusted Ebitda margins of over 5 per cent by FY31,” it said.

Zomato’s Bistro

Meanwhile, Zomato’s wholly owned subsidiary, Blink Commerce, recently launched a new app called Bistro, which offers delivery of convenience food items, including hot and cold beverages, shakes, juices, snacks, fast food, value meals, and desserts, within 10 minutes.

This is similar to Zepto Café and Swiggy Bolt.

According to an analysis by JM Financial Services, since Bistro will deliver food from self-operated kitchens, the platform will have much better control over the quality of ingredients, hygiene conditions in the kitchen, and delivery timelines, which should improve customer experience and increase ordering frequency.

“While we await more details before incorporating the impact of Bistro’s launch into our model, this could help Zomato better penetrate the small-ticket food consumption space in India,” the brokerage said, maintaining a ‘buy’ rating.