Key Points of Zomato Gold Price Hike:
- Zomato increases Gold package price to Rs 299 for three-month subscription
- Price still lower than Swiggy One’s loyalty program
- Brokerage firm Kotak Institutional Equities maintains Buy rating on Zomato
- Firm sets target price of Rs 82 per share, representing an upside potential of 60%
- Zomato explores launch of local services on Blinkit, such as plumbing and electrical work
- Launch of local services shouldn’t involve significant cash burn, according to Kotak Institutional Equities
- Zomato faces challenges with discretionary consumption headwinds, but core business EBITDA can increase at a much faster pace
- Zomato will continue to experiment in both Zomato and Blinkit businesses to increase share of customer’s wallet
Details of Zomato Gold Price Hike:
Zomato Increases Gold Package Price While Exploring Local Services on Blinkit
Zomato, the popular food delivery platform, has raised the price of its Gold package from Rs 149 to Rs 299 for a three-month subscription. This move comes after a series of price increases, although it still remains lower than Swiggy One’s loyalty program, which offers a three-month package for Rs 399.
Despite the price hike, brokerage firm Kotak Institutional Equities maintains its Buy rating on Zomato, setting a target price of Rs 82 per share, which represents an upside potential of 60% from the current market price of Rs 51 per share. The firm believes Zomato will eventually increase pricing by offering higher renewal prices to existing customers and negotiating for higher take rates with restaurants, which can offset any impact of Zomato Gold.
Zomato has also been experimenting with its service proposition in Blinkit to drive optimal product value fit. According to media reports, it is exploring the launch of local services, such as plumbing and electrical work, within minutes, on its platform.
Kotak Institutional Equities notes that Zomato has tried other services on Blinkit in the past, quickly scuttling services that didn’t work. However, the brokerage firm reckons that the launch of local services shouldn’t involve significant cash burn.
Although shares of Zomato were trading 2% higher on BSE in Thursday’s intraday trade, the stock has fallen 14% on a year-to-date basis and 32% in the last year. The firm also warns that discretionary consumption headwinds may weigh on near-term growth for Zomato, with a revival in discretionary consumption potentially taking 2-3 quarters as high food price inflation is absorbed by consumers and non-metro demand returns.
Despite potential challenges, Kotak believes that Zomato’s core business EBITDA can increase at a much faster pace, given the operating leverage potential in the business. The brokerage firm’s DCF of the food delivery business bakes in FY2023-30 food delivery GMV CAGR of 19%. Finally, it notes that Zomato will continue to experiment in both Zomato and Blinkit businesses as it attempts to increase its share of the customer’s wallet.
In 2008, Deepinder Goyal and Pankaj Chaddah established Zomato, a multinational restaurant aggregator and food delivery firm headquartered in India. As of 2022, Zomato offers details, menus, and user evaluations for restaurants in over 1,000 Indian cities, as well as food delivery choices from collaborating eateries.
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