Zomato Shares Hit 52-Week High, Jump Over 1O Per Cent After First-Ever Quarterly Profit

Zomato on Thursday reported its first-ever consolidated profit after tax (PAT) of Rs 2 crore for Q1 FY24 marking a turnaround from a net loss of Rs 186 crore reported in Q1 FY23

Zomato shares price hit a 52-week high on Friday after posting the first-ever consolidated profit after tax of Rs 2 crore in the April-June quarter of 2023-24 yesterday. Shares of online food delivery firm zoomed over 14 per cent in morning trade. At BSE, stocks opened at Rs 89.00 a piece and after a volatile trading session, it reached a high of Rs 98.39 during the intraday session. 

The closing price stood at Rs 95.43, up 10.68 per cent from the previous close of Rs 86.22. At the NSE, Zomato shares rallied 13.69 per cent to its 52-week peak of Rs 98.40 during the day. 

Following Q1 FY24 results, Zomato Ltd also witnessed a surge in the target price from multiple brokerages.  While several brokerages raised their target price, many retained their current stock ratings.  The company's newfound profitability has garnered increased attention from investors and analysts alike.

In a letter to shareholders, the company said, "Consolidated business (including quick commerce) is now Adjusted EBITDA and PAT positive (first time ever!). We have (again) delivered ahead of our guidance on getting to this milestone"

The company's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for Q1 FY24 stood at 12 crore. Consolidated revenue from operations in Q1 FY24 stood at Rs 2,416 crore, up 70.9 per cent compared to Rs 1,414 crore in Q1 FY23. However, total expenses also rose to Rs 2,612 crore compared to Rs 1,768 crore in the same quarter last year.

How Zomato Posted Rs 2 Crore Net Profit

Zomato's consolidated unaudited financial results for the quarter that ended June 30, 2023, filled with exchanges, showed an interesting scenario. The company reported a 'Loss before Taxes' of Rs 15 crore in Q1 FY24. However, after accounting for 'Current Tax' of 0 and 'Deferred Tax' of Rs 17 crore, Zomato managed to achieve a profit after tax (PAT) of Rs 2 crore. This profit was made possible by offsetting the current loss with previous losses from earlier quarters. 

Deferred tax refers to the recognition of the tax impact of particular transactions or occurrences in the financial statements, although the actual tax payment or refund will occur in future periods.

Here's What Brokerages Say

Brokerage houses had varied opinions on Zomato's performance. According to Moneycontrol, JM Financial described Zomato's earnings as 'stellar'. "Baking in the results and the guidance, even with a decent margin of safety, suggests Zomato is a rare play on both growth as well as profitability. While the stock has moved up 35 percent since March-quarter results, we expect the momentum to sustain, as at CMP, the market is largely capturing value attributable to only its FD business, whereas significant value unlocking is waiting to happen in Blinkit," JM Financial said in a note, as per the reports. 

Nomura on the other hand maintained its 'Reduce' rating on the company and projected a 31 per cent downside, as per the Business Today report. Their target price for Zomato was set at Rs 60.

Analysts at Nomura said, "While we acknowledge that Zomato is likely to achieve its target of 4-5 per cent EBITDA margin (as a per cent of GOV) earlier than our expectation, we continue to believe that it will be a challenge to achieve double-digit CM, with high growth in the long term (High growth with margin expansion to be a challenge).”

As per the report, JPMorgan and UBS have optimistic views on Zomato's future prospects. JPMorgan reaffirmed its 'overweight' rating on the company and set a target price of Rs 100 per share. Meanwhile, UBS also maintained its 'buy' rating with a target of Rs 90 per share.