ab Global Research

20 January 2025

First Read

Zomato Limited Equities

Q3FY25: Strong growth in quick commerce India

Internet Services
offsets slight moderation in food delivery
12-month rating Buy
12m price target Rs320.00
Q: How did the results compare vs expectations?
A: Zomato's Q3FY25 were decent, with strong GMV growth in quick commerce growth
compensating for margin deterioration and a modest slowdown in food delivery. Price (17 Jan 2025) Rs248.75
Revenues were up 64% YoY and came in c2% above consensus. While food delivery RIC: ZOMT.BO BBG: ZOMATO IB
adj. revenues were up 3% QoQ (c17% YoY, 2.6% below consensus), Blinkit revenue
Trading data and key metrics
grew c21% QoQ (c117% YoY, 2.3% above consensus). Adjusted EBITDA missed
consensus by c20%, due to higher losses at Blinkit. The EBITDA miss, coupled with 52-wk range Rs303.00-130.05
higher depreciation (+37% QoQ, +93%YoY) and tax expense, led to PAT of Rs. 0.6bn Market cap. Rs2,126b/US$24.5b
missing the consensus estimate of 2.3bn. Shares o/s 8,549m (ORD)
Free float 100%
Q: What were the most noteworthy areas in the results? Avg. daily volume ('000) 61,824
A: 1) Food delivery: GOV growth slowed to 2.3% QoQ (c17% YoY, vs consensus Avg. daily value (m) Rs16,581.6
estimate of +5% QoQ), due to the broader consumption slowdown. Margins expanded Common s/h equity (03/25E) Rs226b
from 3.5% in Q3 to 4.3%, beating consensus' estimate of 3.7%. 2) Quick Commerce: P/BV (03/25E) 9.7x
Blinkit GOV grew by a strong 27% QoQ (120% YoY), well above consensus estimate of Net debt to EBITDA (03/25E) NM
19%. EBITDA margins, on the other hand, declined from -0.1% to -1.3% (vs consensus
EPS (UBS, diluted) (Rs)
of flat margins), which management attributed to "bringing forward" of investments
UBS Cons.
towards expanding dark stores and warehouses (216 dark stores added in Q3). 3) Other
03/25E 1.56 1.09
segments: Going out revenues grew c67% QoQ, but losses expanded QoQ. Hyperpure 03/26E 2.95 2.47
revenues (+13% QoQ) came in marginally ahead of estimates. 03/27E 4.99 4.23

Q: Has the company's outlook/guidance changed? Navin Killa

A: 1) Food delivery GOV expected to grow 20%+ over the long term despite some Analyst
[email protected]
slowdown in near-term, 2) food delivery EBITDA margin expected to reach 5% in the +852-2971 7594
next few quarters, 3) Blinkit GOVs to grow at 100%+ at least for FY25 and FY26,
4) Blinkit margin expansion pause to be temporary, and likely to accelerate as the store Aditya Chandrasekar
Analyst
expansion phase slows, 4) dark store rollout accelerated now targeting 2000 by Dec'25
[email protected]
(Dec'26 in earlier guidance), 5) total employee cost to remain elevated in the near term, +91-22-6155 6056
and is expected to come down to 6-8% of adjusted revenues by FY27 (FY26 in earlier
guidance). Ajay Raj Choudhary
Associate Analyst
[email protected]
Overall decent results +91-20-3055 5000
While slowdown in food delivery surprised, margin expansion was a positive. Blinkit
growth surprised on the higher side, and we think the marginal margin decline was also
expected due to the increased competition in the space. Overall, decent results, in our
view.

Highlights (Rsm) 03/22 03/23 03/24 03/25E 03/26E 03/27E 03/28E 03/29E
Revenues 41,924 70,794 121,140 200,155 291,502 373,290 473,571 596,596
EBIT (UBS) (20,011) (16,472) (4,840) 6,508 29,345 52,636 82,360 125,929
Net earnings (UBS) (15,061) (9,714) 3,510 14,376 27,201 45,940 70,150 105,724
EPS (UBS, diluted) (Rs) (1.77) (1.05) 0.38 1.56 2.95 4.99 7.61 11.48
DPS (net) (Rs) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Net (debt) / cash 3,220 (2,885) (4,400) 26,587 60,475 111,596 188,843 302,269
Profitability/valuation 03/22 03/23 03/24 03/25E 03/26E 03/27E 03/28E 03/29E
EBIT (UBS) margin % (47.7) (23.3) (4.0) 3.3 10.1 14.1 17.4 21.1
ROIC (EBIT) % (23.4) (13.5) (4.4) 7.5 35.6 63.2 98.0 149.9
EV/EBITDA (UBS core) x NM NM >100 >100 55.0 32.5 20.4 12.9
P/E (UBS, diluted) x (69.6) (57.7) NM NM 81.6 48.3 31.6 21.0
Equity FCF (UBS) yield % (0.6) (0.8) 2.5 1.0 1.6 2.5 3.8 5.5
Dividend yield (net) % 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Source: Company accounts, LSEG Eikon, UBS estimates. Metrics marked as (UBS) have had analyst adjustments applied. Valuations: based on an average share price that year, (E): based on a share
price of Rs 240.95 on 20-Jan-2025

This report has been prepared by UBS Securities Asia Limited. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES,
including information on the Quantitative Research Review published by UBS, begin on page 5. UBS does and
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conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making
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