3 weeks ago
The majority of analysts covering Eternal Ltd., the parent company of food delivery aggregator Zomato, have raised their price targets on the stock following the company's April-June quarter (Q1FY26) results.
Eternal registered strong Q1 results, with Blinkit's revenue for the quarter surging to ₹2,400 crore, surpassing Zomato's food delivery revenue of ₹2,261 crore.
Overall, Eternal's consolidated revenue grew 70% year-on-year to ₹7,167 crore. However, net profit fell sharply by 90% to ₹25 crore from ₹253 crore a year ago, showing margin pressures.
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) stood at ₹115 crore, a 35% decline from the previous year.
Brokerage firm Jefferies has upgraded the stock to a 'Buy' rating and raised its price target to ₹400, implying a potential upside of 45% from Monday's closing levels. This is also the highest price target on the Street for Eternal.
While Q1 performance was mixed, management commentary was significantly positive, particularly on quick commerce, which marks a shift from previous quarters, the brokerage said.
Growth remained strong and the margin outlook has improved, as competition pressures appear to have peaked. Additionally, there is further upside potential from the first-party (1P) model, where the company sells directly to customers.
Food delivery growth moderated, but management expects a pick-up ahead, with short-term margins expected to remain range-bound.
Bernstein has an 'Outperform' rating on Eternal and has raised its price target to ₹320.
The brokerage said Eternal delivered a robust quarter, with a strong beat in QC, GOV rose 140% YoY, driven by dark store expansion and lower-than-expected adjusted EBITDA losses.
Food delivery GOV grew steadily at 16.2% YoY, ahead of consensus estimates, with a focus on expanding margins to 5% of NOV.
Zomato remains Bernstein's top pick, as it is well-positioned to benefit from the structural shift toward QC.
CLSA has retained its 'High Conviction Outperform' rating on Eternal, with a price target of ₹385.
The brokerage said that Blinkit's QC segment is now larger than its food delivery business, with QC gross order value (GOV) growing 127% YoY and 25% QoQ. Contribution rose 81% YoY, while contribution per order remained flat QoQ, despite the addition of 905 stores YoY on a base of 639.
Blinkit's QC GOV and contribution were 8% and 6% above estimates, respectively.
EBITDA loss was broadly in line with expectations but better than consensus estimates.
Meanwhile, the food delivery business reported in-line GOV but missed on margins.
Nuvama Institutional Equities has maintained its 'Buy' rating on Eternal and raised the price target to ₹320 from ₹290.
Management has guided for higher profitability, assuming competitive intensity remains stable, as stores opened over the last twelve months (LTM) begin to mature.
Additionally, Blinkit's transition from a third-party (3P) to a first-party (1P) model is expected to result in a 1% margin expansion as a percentage of NOV over the next two to three quarters. Management also aims to open 2,000 dark stores by December 2025, with plans to scale up further to 3,000 stores.
Nuvama now values both the food delivery and Blinkit businesses at $16 billion, attributing the sharp increase in revenue estimates primarily to Blinkit's shift to the 1P model.
The brokerage has revised its FY26E/FY27E earnings estimates by 1.4% and 8.4%, respectively.
Out of the 32 analysts that have coverage on Eternal, 28 of them have a 'Buy' rating, and four of them have a 'Sell' recommendation.
Shares of Eternal ended 7.5% higher on Monday after the results announcement at ₹276.50. On a year-to-date basis, the stock has surged 31%.
