After hitting a fresh all-time high of Rs 368.45 apiece in October last year, the stock has declined more than 42% to hit a low of Rs 212.60 apiece on Monday. JM Financial explained that the first leg of this correction was driven by concerns around leadership changes. While announcing its Q3 results in January, the company said that founder and Group CEO Deepinder Goyal had resigned from his role, and Blinkit CEO Albinder Dhindsa would take over. High competitive intensity in the quick commerce space also weighed, as ecommerce heavyweights Amazon and Flipkart stepped up.
Also Read | Flexi cap mutual funds record highest inflows for 7 consecutive months. Will the trend continue?
Gas crisis impact on Zomato is overstated
Later, Eternal shares declined amid expectations that the LPG crisis arising out of the prolonged closure of the Strait of Hormuz amid the Iran war may have an impact, as several restaurants across major cities reportedly shut down. However, JM Financial said that these concerns might be overstated as long as there is no mass-scale shutdown (like during the Covid-19 pandemic), as customers can shift to operational restaurants.
JM Financial therefore maintained the NOV growth forecast of around 18% YoY for Zomato in Q4 FY26, the highest in the last seven quarters. Even if 25% of orders are disrupted in the final weeks of the quarter, NOV can still grow around 15% YoY, it said, adding that the impact of new competition in the food delivery segment is overstated.
“To be sure, global events are hard to predict, but we strongly believe Eternal, particularly its Blinkit business, shall emerge stronger once macros normalise,” the domestic brokerage said. “In 4QFY26E, Blinkit’s NOV is likely to expand by low double-digit QoQ despite high competitive pressures (though slower than 14% in 3Q), supported by mid-teens order volume growth. We also expect a decent uptick in its adjusted EBITDA margin to 0.4% of NOV versus breakeven in 3QFY26,” it added.
Aggressively accumulate Eternal shares at these levels
Investors with a 12-18 month horizon should aggressively accumulate Eternal at these levels, according to JM Financial, as the stock is attractively priced at 35x Mar’28E PER. “While we are cutting target NTM PE to 65x (from 75x) factoring in global macros and competitive risks, our TP is unchanged at Rs 400 on a rollover to Mar’27E,” it said. The target price implies an upside potential of a whopping 80% from the previous closing price of Rs 222.04 apiece on NSE.
Eternal shares have gained around 5% on Tuesday to trade at Rs 232.19 apiece, emerging as the top gainer on benchmark indices Sensex and Nifty. Its peer Swiggy also saw a sharp uptick in share price, rising 2.5%.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)