Did an analysis of the Q4 results of Zomato here. The major talking point in the earnings call + Q4 PPT was Blinkit (Quick Commerce) where Zomato has been expanding quite rapidly.
Here’s a brief summary:
Pros
Food Delivery
- Food Delivery as a segment has matured with reasonable growth rates - however contributes close to 60% of topline and is the only segment which is profitable at the EBITDA level.
- Revenue / EBITDA growth was flat however there was further expansion in margins
- Average MTC was UP, ATC of around 66 million (up 10% YoY)
- Launch of new service called ‘Large Order Fleet’ – to cater to large orders for parties, gatherings, events.
- Scaling up Zomato Everyday - a service to provide home cooked food at reasonable rates. This service is live in Gurugram + a few location in Bengaluru.
Quick Commerce
- All key metrics were UP. Blinkit achieved Adjusted EBITDA positivity in the month of March’24 and is gradually inching towards profitability.
- Management wants to double store count to reach 1000 stores by March’25. Expect addition of 100 stores in Q1FY25. Presence in 26 cities with Delhi NCR having the highest store count + GOV.
- Management wants to 4X GOV in non-metro NCR cities (top 8 cities) with a long term plan of having 400 / 500 stores in each metro.
- Margins in quick commerce have increased (which is a function of product margin + delivery fees + ad income)
- Average delivery fee per order was INR 20 – which the management will not reduce despite lower delivery fee offered by competition.
- At some point, Blinkit’s MTU > Zomato’s MTU
Others
- Strategy with HyperPure is to grow and not focus primarily on profitability because there is more room to grow as per the management.
- Going Out Segment has been growing well, would be interesting to see how it contributes to the bottomline in the future.
Cons
- Zomato is probably losing money on Gold program. There was no update on Gold pricing to better monetize the Gold program.
- With growth in Quick commerce, there could be some cannibalization of food delivery – since people can order vegetables and make food at home instead of ordering online.
- Increase in ESOP pool, would lead to increase in ESOP Costs affecting profitability.
At a P/E of >450 times (had to double check this) – at this valuation unless Zomato can double it’s profits every year, it doesn’t warrant a good entry point.
Disclosure: Not invested, tracking to see how long the frothy valuations can last.
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