Eternal Shares: JM Financial retains ‘Buy’ tag, trims target citing intense competition

JM Financial has trimmed its price target on Eternal (formerly known as Zomato) as it believes that the sequential growth for Blinkit is likely to moderate in Q3FY26, mainly on account of high competitive intensity and an unfavourable base (early festive benefit in Q2). It has slashed the price target by 11.11% on the stock.

"Growth trends in food delivery are improving, as we expect net order value (NOV) to expand 16% YoY. Margins are likely to remain stable. Despite softening near-term growth expectations for Blinkit, Eternal remains our preferred pick as it is the best-positioned player across its B2C businesses on account of market leadership, superior unit economics, and healthy balance sheet," it said.

Analysts expect Blinkit’s NOV growth in 3QFY26 to moderate to 13% QoQ, down from 25%/27% in 1Q/2Q, mainly due to earlier festive spending and increased competition from multiple players lowering MOV thresholds and delivery fees. However, this moderation is seen as temporary, with Blinkit still expected to deliver over 120% YoY NOV growth in 3Q, above management guidance. FY27 NOV growth is projected at 90% YoY.

The report notes that recent aggressive expansion and promotions by new entrants (Minutes/Now/Jiomart) are unlikely to be sustained due to unsustainable losses. Blinkit’s better unit economics (Adj. EBITDA loss per order INR 7 vs INR 84 for Instamart in 2Q) and strong supply chain position it well to maintain growth and profitability.

Shares of Eternal traded on a flat note, around Rs 285 on Tuesday, commanding a total market capitalization of Rs 2.75 lakh crore. The stock has tanked nearly 23 per cent from its 52-week high at Rs 368.40, hit two month ago. The stock is down 8 per cent in the last one month, while it has remained largely flat on a year-to-date (YTD) basis.

JM Financial emphasizes Blinkit’s superior growth quality, supported by a large and engaged user base and stable ordering patterns. There has been no significant drop in average order values or frequency. Blinkit’s per-order losses remain much lower than peers, reinforcing its structural advantage, JM said.

On profitability, the brokerage expects Blinkit’s Adj. EBITDA losses to narrow in upcoming quarters, driven by take-rate expansion, operating leverage, and benefits from the inventory-led model. Blinkit is projected to reach EBITDA break-even by 1QFY27, with margins improving from -1.8%/-1.3% in 1Q/2QFY26 to -0.9% in 3Q.

For Eternal’s food delivery business, the report expects Zomato’s NOV growth to improve sequentially in 3QFY26 after recent macro challenges, with medium-term growth in the high-teens—1.2x-1.5x the underlying market. Growth drivers include changing consumer habits and new restaurant supply. Margins are expected to remain stable at 5-6% of NOV, supported by the duopoly market structure.

Eternal’s robust balance sheet, with net cash over Rs 18,000 crore, provides flexibility to withstand competition and invest for growth. The company continues to generate free cash flows at the consolidated level, excluding one-off working capital impacts, it noted.

Valuation remains attractive, as Eternal trades at a discount to high-quality retail and consumer internet peers. As profitability improves across Blinkit and food delivery, the stock is well positioned for a medium-term re-rating. JM Financial maintains its ‘BUY’ call, with a revised target price of Rs 400 (from Rs 450 earlier), reflecting updated NOV and margin estimates. Eternal remains a preferred pick in the listed Internet space, backed by strong industry tailwinds and a solid balance sheet (net cash Rs 18,399 crore as of Sep’25).