Zomato hit 52-week high as HSBC raises target price to Rs 150

Analysts at HSBC say Zomato’s long-term view remains constructive despite likely muted growth in 2024

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Shares of Zomato gained over 2 percent to hit 52-week high of Rs 137.5 after global brokerage firm HSBC shared a “buy” rating on the counter and raised the target price to Rs 150, an upside of 9 percent from current levels.

In the past one month, the stock of the food-delivery platform has surged over 15 percent against a 2 percent rise in the benchmark Sensex.

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Analysts at HSBC said Zomato’s long-term view remains constructive despite a likely muted growth in the calendar year 2024.

“Since Zomato is highly dependent on continued progression of quick commerce business, any slowdown in quick commerce growth will be a key downside risk,” they said.

Analysts at Elara Securities also shared a “buy” call and a target price of Rs 150, saying the company’s higher convenience fees, advertising income and commission from restaurants were key levers to improve profitability of the food- delivery business.

ALSO READ: Zomato introduces ‘Daily Payouts’ feature for restaurants handling less than 100 monthly orders

“We expect another 10-20 basis point (bp) expansion each in the take rate of FY25E and FY26E due to incremental convenience fee of Re 1 in select markets,” the brokerage firm said.

The gradual increase in convenience fee was unlikely to significantly impact consumers, as the charge was around 0.9 percent of the average order value (AOV).

Zomato has raised its platform fee for food delivery services by 33 percent, hiking it from Rs 3 to Rs 4 a order in key markets effective January 1.

It started levying a convenience fee of Rs 2 per order in August 2023, which was raised to Rs 3 by month-end. The convenience fee has been one of the drivers of growth of 60 bp quarter-on-quarter and 220 bp year-on-year in the take rate (19.4 percent, excluding delivery charges) in Q2FY24.

At 10.45 am, the stock was trading at Rs 137.30 on the BSE, up 1.97 percent from the previous close.

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