HSBC says to ‘cut back’ Zomato – Investing.com UK
By Aditya Raghunath
Investing.com – HSBC, in its August 4 report, said that Zomato Ltd (NS 🙂 may encounter strong headwinds which will impact its numbers. It has a reduced call on the share with a target price of Rs 112. The stock is currently trading at Rs 127.75, up 68% from its issue price of Rs 76.
HSBC said that if the company will experience massive volume growth as the economy reopens, it will also mean that the average order volume will decline. “In the short to medium term (post-COVID-19), volumes could increase sharply, as office orders will also return, but that would mean a lower average order value (AOV),” he said. HSBC estimates that the AOV will fall 5% in FY22 and 6% in FY23.
He said the opportunity was huge, but it involved people consuming food differently, from home-cooked meals to restaurant meals. He added: “This is why we believe that while the long-term opportunity is real, the market may end up overestimating short-term growth.”
“While Zomato remains a compelling story, we believe the already high valuations contribute to some very bullish estimates, and a look at global peers (trading at 1-1.5x 12m EV / GMV forward vs. 2.5x FY25e EV / GMV for Zomato) corroborates this. “, adds the report.