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Zomato Q2FY25: Food Delivery Leads Profitability; Quick Commerce Expands Rapidly

Zomato Q2FY25: Food Delivery Leads Profitability; Quick Commerce Expands Rapidly

Zomato Q2FY25: Food Delivery Leads Profitability; Quick Commerce Expands Rapidly

Company Name: Zomato Ltd | NSE Code: ZOMATO| BSE Code: 543320 | 52 Week high/low: 298 / 101 | CMP: INR 510 | Mcap: INR 2,26,469 Cr | P/E – 305

About the Stock
➡️Zomato is engaged in multiple business vertical segment such food delivery, quick commerce (Blinkit), going out and B2B supplies. Company has done rapid expansion in quick commerce segment by adding 152 net new stores in Q2FY25.

GOV shoot up led by all segment (up 55% YoY /14% QoQ)
➡️Zomato’s gross order value grew healthy across all the segment. GOV (B2C business) increased 55% YoY (+14% QoQ) to 17,671 Cr thanks to all segment. This growth is attributed to strong growth in food delivery business (up 21% YoY/ 5% QoQ) followed by Quick commerce (up 122% YoY/ 25% QoQ) and Going out (up 171% YoY/ 46% QoQ including the acquisition of Paytm’s entertainment business).
➡️Key operating metrics of all business segment helps in robust growth. In blinkit business 152 net new stores and 7 warehouse added. This rapid expansion will take time to ramp up the business across all new store.
➡️Average monthly customer surged 13% YoY (+2% QoQ) to 20.7 Mn in Q2FY25 vs 18.4 Mn in Q2FY24 for food delivery business. While Quick commerce customer base nearly double from 4.7 Mn in Q2FY24 to 8.9 Mn in Q2FY25 reflecting the change in buying pattern of consumer and habit for convenience buying.
➡️Quick commerce order value double to 92.9 Mn in Q2FY25 from 45.5 Mn in same quarter previous year led by increase in Average order value and new customer base.

GOV Q2FY25 Q2FY24 YoY (%) Q1FY25 QoQ (%)
Food Delivery 9,690 7,980 21% 9,264 5%
Quick Commerce 6,132 2,760 122% 4,923 25%
Going-Out 1,849 682 171% 1,268 46%
Total  17,671 11,422 55% 15,455 14%
Operating Metrics Q2FY25 Q2FY24 YoY (%) Q1FY25 QoQ (%)
Food Delivery
Avg Monthly Customer (Mn) 20.7 18.4 13% 20.3 2%
Restaurant Partner (000′) 292 238 23% 276 6%
Delivery Partner (000′) 498 410 21% 469 6%
Quick Commerce
Order (Mn) 92.9 45.5 104% 78.8 18%
AOV (INR) 660 607 9% 625 6%
Customer (Mn) 8.9 4.7 89% 7.6 17%

Profitability soar on growth in food delivery business & Margin expansion; Quick commerce near by break even
➡️Zomato’s food delivery business has maintained the overall profitability despite the loss in quick commerce business. Overall EBITDA surged 581% YoY (+28% QoQ) to 226 Cr driven by strong growth in food delivey business and margin expansion (636 bps YoY). While quick commerce adjusted EBITDA come to near by break even at -8 Cr from -125 Cr in Q2FY24. EBITDA margin has expand 636 bps YoY (+50 bps QoQ) to 4.71%. led by all segment.
➡️Despite the robust growth in quick commerce GOV, margins are not improving due to the rapid infrastructure expansion. In Q2FY2, 152 net new store and 7 warehouses added lead to margin dilution for short term as new store and warehouse take few months to ramp-up.
➡️EBIT grew 126% YoY (+64% QoQ) to 46 Cr due to increment in depreciation by 41% YoY to 180 Cr. EBIT margin lead the growth up 710 bps YoY (+29 bps QoQ) to 0.96%.
➡️PAT surged 389% YoY to 176 Cr thanks to higher other income of 221 Cr. PAT margin jump 241 bps YoY to 3.67%. While on QoQ basis PAT down 30% due to higher tax expenses and interest cost.

Years (in Cr) Q2FY25 Q2FY24 YoY (%) Q1FY25 QoQ (%) Commentry 
Revenue  4,799 2,848 69% 4,206 14% Driven by healthy GOV across all segment
COGS 1,334 674 98% 1099 21%
Employee cost 590 417 41% 529 12%
Advertisement & sales promotion 421 355 19% 396 6%
Delivery & related charges 1,398 919 52% 1,328 5%
Other expenses 830 530 57% 677 23%
Total OpEx 4,573 2,895 58% 4,029 14%
EBITDA  226 -47 581% 177 28% Led by food business & Margin expansion;
Quick commerce near by break-even
EBITDA Margin% 4.71% -1.65% 6.36% 4.21% 0.50%
Depreciation 180 128 41% 149 21%
EBIT 46 -175 126% 28 64%
EBIT Margin% 0.96% -6.14% 7.10% 0.67% 0.29%
Interest expenses 30 16 88% 25 20%
Other income 221 212 4% 236 -6%
PBT 237 21 1029% 239 -1%
Tax expenses 61 -15 507% -14 536%
Tax Rate% 26% -71% 136% -6% 539%
PAT 176 36 389% 253 -30% Pushed higher other income
PAT Margin% 3.67% 1.26% 190.13% 6.02% -39.03%
EPS 0.20 0.04 374% 0.29 -31%
No. of Shares 872 845 3% 870 0%

Fund raise planned via QIP for strong cash postion
➡️Comapny has propsed the plan to board forraising 8,500 Cr by issue of equity shares via QIP. Management aim to enhance cash balance given the competitive landscape and and much larger scale of business currently.

Valuation and Key metrics
➡️Currently the stock is trading at a multiple of 305x 0.84 EPS at the CMP of 256 Rs. Company trading at 10.6x its book value of 24.1 per share. Trailing twelve months ROE and ROCE stood at 1.12% and 1.14% respectively. Interest coverage ratio stood at 9.18x signify strong solvency.

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