Valuation Update Zomato FY 24: 1Y Revenue Growth 71%, 1Y Stock Price Growth 172%
Fundamental Analysis of Zomato
Hi 👋🏻,
I did a valuation of Zomato in the month of April. You can read it here.
I was waiting for the results for the last quarter of FY24 to come in to update my thesis, but it took me some time to write about it.
This will be a relatively short post.
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Let proceed with our valuation without further ado.
Note: I am not a registered advisor or agent. Anything I write in these posts are purely for your entertainment and educational purposes. Nothing in this post is an advice for you to make an investment or buy any stock. You are free to download the Excel and play around with it.
Stock Performance
In the last one year, Zomato has delivered a stock appreciation of 171%.
Zomato had a net positive FY24 with PAT of around Rs 351 Cr and sales growth of 71% YOY.
Overall Business
Zomato has 4 business segments at the moment:
Food Delivery
Quick Commerce or groceries
Going out
Hyperpure i.e. B2B supplies
In FY24, Zomato has done a GOV of Rs 47,918 Crore from top 3 businesses, and a GOV of Rs 3172 from Hyperpure.
What is GOV? GOV is total value of the order which is delivered to the customer. Consider it like the total bill value whenever you buy groceries or food from Zomato.
The B2C businesses had a net growth of 48% since last 1 year, and segmental growth as follows:
Food business: 23% YOY
Quick Commerce: 169% YOY (Taken from date of acquisition)
Going out: 136% YOY
The revenue generated by each business vertical is shown in Fig 3. The YOY change is 56%
Food Delivery
Zomato has increased its GOV at a CAGR of 30% and is guiding that the business will grow at 20% rate in coming years.
Its annual transacting customers and monthly transacting customers have also increased in FY 24.
Quick Commerce
Blinkit’s acquisition by Zomato proved out to be a net value addition to its shareholders, at least it looks like it.
The business has grown YOY basis by 93%, and Zomato expects this to be around 60% YOY for the coming few years.
The average monthly transacting customers has increased by 73% on Blinkit.
The contribution margin has turned positive in Q2FY24, and the management expects the adjusted EBITDA long term to be around 4-5%.
Going Out
Going out business had a 136% growth in its GOV and around 51% growth in its revenues.
Zomato has not given any guidance on what the tentative size of the business would be or how will it pan out at the moment, based on what I read in latest earnings call at least.
Hyperpure
Hyperpure business had a revenue growth of 152%. There is no specific long term guidance as such.
Valuation
In our last valuation of Zomato in April, we got a share value of around Rs 130.
In today valuation, we will make some updates in our assumptions and take it ahead from there.
Assumptions
Based on the data available on Grocery market and Food+Grocery Market for India, We had estimated the market size of food delivery business and grocery business segment separately.
We got the following result in USD:
Keeping USD/INR at 83, we will make changes in growth rates of Food and Groceries GOV as per the guidance, i.e. 20% YOY food GOV growth.
We have assumed that Zomato will roughly take around 40% of market in around 5 years and scaled up the market share slowly each year from 11.24% to 40% to get Total Zomato GOV.
Subtracting Food GOV from Total GOV gives us Grocery GOV (as shown in last column of fig 11)
These changes will affect the figures in columns marked with red lines in Fig 11 (April projections). Since we have got updated GOV number for groceries and food, the market share for FY24 will be updated as well (Check Fig 12)
For revenues, I will keep the assumption for hyperpure and going out to be the same i.e. 25% of total revenue and 5% of total revenue respectively. Using these, we get the following revenue projection.
Keeping other parameters almost the same, I redid the valuation. However, two key information were missing:
I could not find the latest outstanding ESOPs since the Annual report is not out. I have no idea why Zomato did not share outstanding ESOPs. However, just for the time being, I assumed the value of ESOPs to be the same I got in my last valuation.
I could not find Net operating loss (NOL) value as well. Will have to wait for the annual report here too. I decreased NOL by Rs 42 Cr, since the operating income for FY 24 was around Rs 42 Cr.
I will update my values once the annual report is out.
Plugging all together, we get the value per share around Rs 141. The stock is trading at around Rs 182 at the moment.
The only way I could get the value per share to be equal to Rs 180+ was to have Zomato deliver 60% revenue growth per year for next 3 years. Their latest ppt put the revenue growth expectation to be around 40% (Shown in Fig 14)
Zomato is in discussion with shareholders to issue more ESOPs (worth Rs. 3500 Cr at current valuation approx). If approved, this will have a dilutive effect on the equity value.
I am attaching the Excel working for your reference. Feel free to download and play around with the number.
You can play around with the following tabs:
Input Sheet
Zomato Data
Market Size
Valuation output
Option Value
Since this was a follow-up post, I kept the explanation to a bare minimum. I would recommend checking my April valuation post for a more detailed summary.
Thank you for reading.
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