Shares of food aggregator Zomato tanked over 9 per cent to hit an intraday low of Rs 85.85 on BSE after the company reported weaker than expected results for the quarter ended December 2021.
The company reported a narrowing of consolidated net loss at Rs 63 crore for the quarter ending December 31, 2021. The firm had posted a net loss of Rs 352.6 crore in the year-ago period and Rs 429 crore in the previous September quarter.
Revenue from operations came in at Rs 1,112 crore, up 82.47 per cent against Rs 609.4 crore in the year-ago quarter. The Deepinder Goyal-led company also declared a consolidated exceptional gain of Rs 316 crore in the December quarter.
The stock opened a tad lower at Rs 92.90 against the previous close of Rs 94.50 on BSE. The market cap of the firm fell to Rs 70,060.20 crore.
Shares of Zomato hit an all-time high of Rs 169.10 on November 16, 2021. Currently, the stock is trading over 49 per cent below from its all-time high.
"Zomato's results have no big surprises. The company is focused on building a large presence in out-of-home food consumption. The GMV and number of users have shown a sharp growth on a YoY basis without any drop in the AOV. The contribution margin has improved to 1 per cent and the company has guided to EBITDA level profitability when the contribution rate increases to 5 per cent," Abhay Agarwal, founder, and fund manager, Piper Serica told BusinessToday.in.
"It is good to see the company's focus on profitability. We believe that with its organic and inorganic initiatives and a well-funded balance sheet Zomato remains the best play in the fast-growing F&B market. While short-term investors may feel disappointed we believe that Zomato will reward long-term investors handsomely," he added.
Brokerage house Dolat Capital noted that the declining Contribution with weak growth in Gross Order Value (GOV), suggests that the growth is getting softer while cost pressures are not moderating. This along with further allocation of Rs 5.5 billion on minority investments is straining cash-flows.
"Given the persistent losses in the past and expected continuation of the cash burn in near future we believe the company can compound its revenues by 10x over a decade but with modest profitability and cash generation and thus believe DCF valuation as an ideal tool to value real long term potential," it said.
"We have currently factored in Revenue CAGR of 27.4 per cent over FY22-25E & 20.5 per cent over FY26-30E in its hyper-growth stage with exit EBIT Margin of 22.1 per cent in FY30e, Cost of Capital of 10.5 per cent and terminal growth rate of 6 per cent. The average EBIT Margin stood at -30.9 per cent and 7.4 per cent over FY22-25E & FY25-30E respectively. Taking these assumptions, we have arrived at DCF based target price of Rs 75 per share (earlier Rs.90) and maintain our 'Sell' rating on the stock," the brokerage house added.
Zomato made a bumper debut on bourses with the unicorn hitting the Rs 1-lakh crore market capitalisation mark. The stock opened at Rs 116, 52.63 per cent higher on NSE against the issue price of Rs 76. The listing price on the Bombay Stock Exchange (BSE) was at Rs 115, up 51.32 per cent.
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