Zomato’s Q2FY24: Savoring success – GOV surges, Gold glitters

Company Overview:

Zomato Limited, founded in 2010, is one of the biggest online Food Service platforms in terms of food value sold. Its services include meal delivery, dining out, and loyalty programs, among others. Zomato had a significant footprint across 23 countries as of December 31, 2020, with 131,233 active food delivery restaurants, 161,637 active delivery providers, and an average monthly food order of 10.7 million clients. Zomato also operates Hyper pure, a one-stop procurement system that provides high-quality ingredients and kitchen goods to restaurant partners.

Zomato Q2FY24: GOV Up 47%, EBITDA Profitable at INR 41 Crore

Zomato’s consolidated Q2FY24 results were positive, with strong growth across key metrics. GOV (B2C business) grew 47% year-over-year to INR 11,422 crore, driven by strong growth in order volume. Adjusted revenue grew 53% year-over-year to INR 3,227 crore. Adjusted EBITDA improved significantly from a loss of INR 192 crore in Q2FY23 to a profit of INR 41 crore in Q2FY24.

The strong GOV growth was driven by increased demand for food delivery and quick commerce services. Zomato’s Gold program also played a key role, contributing to over 40% of food delivery GOV. The improvement in adjusted EBITDA margin was driven by a number of factors, including increased gross take rate, improved operational efficiency, and reduced costs. Zomato’s is focused on expanding their reach into smaller towns, increasing their customer base, and improving their operational efficiency.

Zomato Gold Soars to 3.8 Million Members, Boosts GOV by 40%

Zomato’s Gold program is shaping up very well. It has scaled to 3.8 million members within just three quarters since its launch, and these members now account for ~40% of the company’s food delivery GOV. This suggests that the program is highly popular with customers and is driving significant business for Zomato. The Gold program offers a number of benefits to members, including discounts on food delivery orders and priority access to restaurants. This makes it a very attractive proposition for customers, especially those who order food delivery frequently.
The fact that Gold members account for such a large proportion of Zomato’s food delivery GOV is a significant positive. It shows that the program is driving loyalty and repeat business among customers. This is important for Zomato, as it helps to reduce the cost of customer acquisition and retention.

Zomato’s Blinkit Turns Contribution Positive in Q2FY24, Margin Improves to 1.3%

For the first time, the quick commerce (Blinkit) business turned Contribution positive for the full quarter in Q2FY24. The business’s contribution margin (as a percentage % of GOV) has increased from -7.3% in Q2FY23 last year (when we acquired the business) to +1.3% today in Q2FY24. Blinkit’s same-store sales grew in Q2FY24, which indicates that existing stores are serving more customers and generating more revenue. This is a positive sign, as it suggests that the company’s unit economics are improving. Blinkit also added 28 new stores in Q2FY24, bringing its total store count to 411. This expansion is helping the company to reach more customers and grow its business.

Valuation and Key Ratios:

Zomato’s stock is currently trading at a valuation of 5.25 times its book value of Rs. 22.9 per share at the current market price of Rs. 116. The company reports an ROE of -5.91 % and ROA of -5.46 % in Q2FY24. The interest coverage ratio stood at -7.63x in Q2FY24, indicating the company’s solvency, while the current ratio stood at 3.93x in Q2FY24. The P/B ratio for the company is 5.06.

Financial Performance Highlights for Q2FY24:

The quarter’s net profit declined year on year (YoY), with a loss of 497 crores in Q2FY24 compared to a profit in the same period last year. The company’s EV/EBITDA ratio increased QoQ, rising to 2,045 in Q2FY24 from Q2FY23. Despite a negative PAT of 497 crores in Q2FY24, the company managed to reduce its losses as compared to the previous quarter. The Price to Book Value ratio scaled significantly year on year, reaching 5.25 in Q2FY24 from a lower ratio in the same quarter last year. Earnings per share (EPS) improved significantly from quarter to quarter (QoQ), with the company reporting a loss of -0.58 in Q2FY24 compared to a greater loss in the prior quarter.

Conclusion:

Zomato’s second-quarter FY24 results were mixed, with great rise in GOV and EBITDA but a sustained loss in net profit. The company’s Gold program is operating effectively and increasing client loyalty. The Blinkit firm is also profitable, which is a good indicator. Zomato’s values, however, remain high in comparison to its financial performance. Overall, the organization is still in the investment phase, with the goal of growing its reach and boosting profitability.