Most of the points from the Q3 concall + investor PPT are already covered above by @Simrat
I’ve captured a few cautionary points in addition to that below and also here
Few points to keep in mind going forward:
- Zomato’s Q3 revenue was high on the back of a festive season in India and the Cricket World Cup, leading to higher sales and food ordering. Q4 is expected to be lower / flattish compared to Q3.
- Fixed costs in the food delivery business increased due to server / tech infra — which will continue to be incurred going forward as well.
- Going-Out business is in the build out phase resulting in increase in employee costs. It will take some time before such expenses will bear fruit.
- Platform fees is unable to cover the cost of acquiring a Zomato Gold member. Pricing of Gold membership has been fluctuating which is a tactical decision to acquire / reacquire customers when membership renewal comes into the picture. The company is yet to reach a sustainable pricing model for it’s Gold membership.
- No comment by the management on the risk of ONDC biting into margins / business share.
Food delivery – as a business model is not a high margins biz. There’s a lot of competition and expanding margins will be difficult. Given that, the current valuation looks extremely expensive.
Disclosure: Not invested. Tracking quarterly results, might buy if the stock drops 30-40% from here
| Subscribe To Our Free Newsletter |
