Eternal share: CLSA, Jefferies, MOFSL, Nuvama see up to 45% upside as QC losses peak

Eternal Ltd (Zomato) has received thumbs up from domestic and foreign brokerages such as MOFSL, Nuvama, CLSA and Jefferies following the online food aggregator's June quarter results, as analysts believe the quick commerce segment losses have peaked, and that margin improvement is all likely going ahead.

CLSA has maintained its 'Outperform' on the stock with a revised target price of Rs 385. Jefferies upgraded Eternal to 'Buy' and upped its target to Rs 400. Nuvama finds the stock worth Rs 320 against Rs 290 earlier. MOFSL pegged the stock target at Rs 330.

MOFSL said Eternal’s food delivery business is stable, and Blinkit offers a generational opportunity to participate in the disruption of industries such as retail, grocery, and e-commerce.

"We lower our FY26/FY27 estimates by 14 per cent/18 per cent, factoring in continued dark store expansion and Rs 150 crore in FY26 losses from newer initiatives such as Bistro (10-minute food delivery) and Nugget under the “Others” segment. Eternal should report PAT margin of 3.1 per cent/6.5 per cent in FY26E/FY27E. Our target of Rs 330 implies a 21 per cent upside from the current price. We reiterate our BUY rating on the stock," it said.

Nirmal Bang said the growth trajectory in food delivery is likely to bottom out in FY26, with an improvement expected in FY27 and beyond. It values the Eternal business on a sum-of-the-parts (SOTP) basis, assigning a 42 times EV/Ebitda multiple to the food delivery segment and a 2 times EV/GOV multiple to quick commerce, arriving at a target price of Rs 321 based on FY27E estimates.

To recall, Eternal reported Q1 revenue of about Rs 7,200 crore, up 70 per cent YoY, above its estimated growth of 62 per cent YoY. Growth was led by Blinkit as its gross order value (GOV) increased 26 per cent QoQ/140 per cent YoY. The food delivery business delivered 16 per cent YoY growth in GOV. Profit tanked 90 per cent YoY.

Eternal expects that in FY26, net order value (NOV) growth in food delivery is unlikely to exceed 20 per cent but should remain above 15 per cent, with momentum building toward 20 per cent YoY growth in FY27.

"Quick commerce surprised, with NOV soaring 127 per cent YoY—ahead of expectations. Margins shall improve ahead due to the transition to an inventory-led model (1 per cent as percentage of NOV) coupled with maturation of recently added dark stores and operating leverage. We are revising FY26E/27E earnings by 1.4 per cent/8.4 per cent. Maintain ‘BUY’ with a revised SotP-based target of Rs 320 (earlier Rs 290)," Nuvama said.

It noted that Food delivery’s contribution margin dipped to 9.9 per cent from 10.3 per cent in Q4FY25 while adjusted Ebitda margin as percentage of NOV fell due to shortage of delivery partners and adverse weather.

The Eternal management has lowered food delivery profitability expectation from 5 per cent as percentage of GOV to 5 per cent as percentage of NOV (4.2 per cent as percentage of GOV). Blinkit’s contribution margin edged down to 3.9 per cent in Q1FY26 while adjusted Ebitda margin (as percentage of NOV) improved 60 bps QoQ to minus 1.8 per cent led by control over marketing spends and operational efficiency.

The management guided for higher profitability if competitive intensity holds as stores opened during LTM mature. Additionally, Blinkit’s transition from 3P to 1P model will lead to 1 per cent margin expansion as percentage of NOV in the next two–three quarters. The Eternal management aims to open 2,000 dark stores by December 2025 and further expand this to 3,000.

"Going-out adjusted Ebitda loss widened to Rs 54 crore in Q1FY26 (INR470mn in Q4FY25). Losses in others segment rose due to investment in Bistros, Nugget and Greening India initiative. We now value both food delivery and Blinkit at $16 billion. The sharp increase in our revenue estimates is due to Blinkit transitioning from 3P to 1P model," Nuvama said.