Zomato is CLSA's top pick in consumer space; foreign brokerage shares target price
Zomato: With Blinkit achieving a positive contribution in Q2FY24, added scale -- as it expands dark store network and city reach, will drive positive adjusted Ebitda in FY25, CLSA said.
- Dec 21, 2023,
- Updated Dec 21, 2023 3:04 PM IST
CLSA in its latest sector note said Zomato Ltd is its top pick in the consumer space. With competitive pricing in addition to the convenience of a 10-20 minute delivery, CLSA believes quick commerce can be viable across cities in India, beyond the metros and tier-1 cities.
"With Blinkit achieving a positive contribution in Q2FY24, we believe added scale as they expand their dark store network and city reach will drive positive adjusted Ebitda in FY25," the foreign brokerage said.
CLSA said Blinket's prices are, on an average, at 23 per cent discount to maximum retail price (MRP) against 19 per cent discount for Swiggy's Instamart and Zepto.
"Our small cart check revealed that Blinkit and Zepto prices are similar to each other but Instamart has slightly higher prices. The final price of the Blinkit and Zepto carts (including delivery charges and handling fees) was 23% and 24% below MRP, offering a significant incentive for consumers to avoid a trip to the corner shop (which typically sells at MRP)," CLSA said.
Blinkit, CLSA said, had the lowest per product pricing on average but was the only quick commerce player to charge a delivery fee in addition to a handling charge.
CLSA noted that JioMart and DMart (Avenue Supermarts Ltd) offer the lowest prices, with the final price being 30 per cent below MRP and 7-13 per cent below the quick commerce players.
Also read: Zomato shares nudge higher after block deal; Softbank likely seller
DMart, it said, offers the lowest prices by a significant margin, with average product pricing being 11-16 per cent below quick commerce players and 33 per cent below MRP.
"However, DMart levies a flat Rs 49 delivery charge, which reduces the effective gap in pricing for a small cart. For a larger cart, pricing on DMart will be much lower than quick commerce.
JioMart offers the most compelling pricing for small carts (Rs 800-Rs 1,600) but the price gap relative to DMart will shrink with cart sizes over Rs 1,600," CLSA noted.
CLSA said one reason to choose deep discounters such as DMart and JioMart has been the availability of private label brands at a substantially lower price than the leading brands.
It gave an example of DMart’s private label coconut oil, which is available at a price 44 per cent below Parachute coconut oil’s MRP (300 ML bottle) and 35 per cent below DMart’s price for the Parachute product.
"At present, we do not see private label brands on the quick commerce platforms," CLSA said.
The brokerage has a share price target of Rs 168 on Zomato Ltd. The stock traded at Rs 124.95 in Thursday's trade.
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CLSA in its latest sector note said Zomato Ltd is its top pick in the consumer space. With competitive pricing in addition to the convenience of a 10-20 minute delivery, CLSA believes quick commerce can be viable across cities in India, beyond the metros and tier-1 cities.
"With Blinkit achieving a positive contribution in Q2FY24, we believe added scale as they expand their dark store network and city reach will drive positive adjusted Ebitda in FY25," the foreign brokerage said.
CLSA said Blinket's prices are, on an average, at 23 per cent discount to maximum retail price (MRP) against 19 per cent discount for Swiggy's Instamart and Zepto.
"Our small cart check revealed that Blinkit and Zepto prices are similar to each other but Instamart has slightly higher prices. The final price of the Blinkit and Zepto carts (including delivery charges and handling fees) was 23% and 24% below MRP, offering a significant incentive for consumers to avoid a trip to the corner shop (which typically sells at MRP)," CLSA said.
Blinkit, CLSA said, had the lowest per product pricing on average but was the only quick commerce player to charge a delivery fee in addition to a handling charge.
CLSA noted that JioMart and DMart (Avenue Supermarts Ltd) offer the lowest prices, with the final price being 30 per cent below MRP and 7-13 per cent below the quick commerce players.
Also read: Zomato shares nudge higher after block deal; Softbank likely seller
DMart, it said, offers the lowest prices by a significant margin, with average product pricing being 11-16 per cent below quick commerce players and 33 per cent below MRP.
"However, DMart levies a flat Rs 49 delivery charge, which reduces the effective gap in pricing for a small cart. For a larger cart, pricing on DMart will be much lower than quick commerce.
JioMart offers the most compelling pricing for small carts (Rs 800-Rs 1,600) but the price gap relative to DMart will shrink with cart sizes over Rs 1,600," CLSA noted.
CLSA said one reason to choose deep discounters such as DMart and JioMart has been the availability of private label brands at a substantially lower price than the leading brands.
It gave an example of DMart’s private label coconut oil, which is available at a price 44 per cent below Parachute coconut oil’s MRP (300 ML bottle) and 35 per cent below DMart’s price for the Parachute product.
"At present, we do not see private label brands on the quick commerce platforms," CLSA said.
The brokerage has a share price target of Rs 168 on Zomato Ltd. The stock traded at Rs 124.95 in Thursday's trade.
Also read: Adani Power shares up 100% in six months; can this Adani stock revisit 52-week high?
Also read: Stock recommendations by market analysts for December 21, 2023: Oil India, ONGC and Asian Paints