Eternal Q2 Results: Stock falls 4% on food delivery warning, slower margin expansion in Blinkit

Shares of Eternal Ltd. parent company of food delivery aggregator Zomato and quick commerce player Blinkit, are witnessing wild swings after the results were announced on Thursday, October 16.

The stock first saw a sharp spike after its Quick Commerce business reported sharp growth in its revenue. However, the stock immediately cooled off after the management said that the Food Delivery business growth will be "slow" in the near-term.

Food ordering revenue grew to ₹2,485 crore from ₹2,012 crore from last year, while Going Out revenue increased to ₹189 crore from ₹154 crore in the year-ago quarter.

On a consolidated basis, Revenue for the quarter nearly tripled, growing 183% on a consolidated basis to ₹13,590 crore from ₹4,799 crore. Revenue growth for the quarter was led by the quick-commerce business. The figure is higher than the CNBC-TV18 poll projection of ₹7,963 crore.

Eternal's quick commerce division, Blinkit, reported revenue of ₹9,891 crore, from ₹1,156 crore last year. This implies a growth of 755% on a year-on-year basis.

Adjusted EBITDA margin as a percentage of Net Order Value improved to a negative 1.3% from negative 1.8% for Blinkit. However, the management said that the pace of margin improvement was slower than what they had anticipated at the beginning of the quarter, and that is due to additional investments in market share growth.

The Net Order Value for the Quick Commerce business increased by 137% from last year, the highest in the last 10 quarters. 80% of the Net Order Value for Blinkit was on the company's own inventory, and the management expects the number to go to a steady state number of 90% in the next quarter.

As a result of this, it expects a net margin expansion of around 1 percentage point, which should be realized over the next four to six quarters.

Eternal's overall net profit fell 63% from last year to ₹65 crore, while its Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) grew by 5.8% on a year-on-year basis to ₹239 crore. A CNBC-TV18 poll was working with a figure of ₹256 crore.

EBITDA margin narrowed to 1.76% from 4.71% in the year-ago quarter. The figure is also lower than the CNBC-TV18 poll estimate of 3.2%.

The stock is witnessing sharp swings, currently trading 2% lower at ₹347.45. The stock had surged as much as 4% after the results announcement. The stock is now trading at record highs. The stock, from the lows of July 27, 2022 of ₹40, is up 9x.