Shares of online food delivery giant Zomato continued its rally for the third consecutive day following a large block deal in which 1.5 crore shares, or 0.2 percent of equity, worth Rs 88.2 crore changed hands at an average price of Rs 59 a share.

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The stock settled 6.26 percent higher at Rs 64.50 apiece in trade today. It gained 25.85 percent in the last one month, while the stock fell 10 percent in the last one year. With this, Zomato's market capitalisation now stands at Rs 54,102 crore.

Zomato shares have an average broker target of Rs 65, implying a potential upside of 0.15 percent from the current market levels, according to data from Trendlyne.

Analysts at brokerage firm Motilal Oswal expect Zomato to report 29 percent revenue CAGR or compound annual growth rate over FY23-25

Initiating coverage on the stock with a 'Buy' rating and target price of Rs 70, Motilal Oswal expects strong growth to be complemented by the company turning profitable over FY25, despite elevated competitive intensity.

"With the exit of Amazon, the food delivery market is now a settled duopoly with Zomato (55 percent market share) and Swiggy (45 percent). The market has a very high moat given the significant capital requirement to displace the incumbents," it stated in a research note.

Zomato Q4FY23 preview

Zomato is expected to report a strong 29 percent revenue CAGR over FY23–25 fueled by higher penetration, higher proportion of transacting users, and increased ordering frequency.

Food delivery GOV to remain flat sequentially in Q4FY23E (+14.2 percent YoY) despite Zomato Gold activation.

"Slowing growth was evident in GOV due to post-Diwali consumption fatigue and the online-to-offline shift," said analysts at ICICI Securities.

However, based on sustained improvement in the underlying operating metrics, the brokerage maintains a 'Buy' rating on Zomato with a DCF-based target price of Rs 65.

"We acknowledge that further slowdown in growth poses a risk to our FY24E/FY25E estimates, but we think, at CMP, the risk reward is still skewed to the upside," it stated.

First Published:Apr 28, 2023 4:21 PM IST