ETERNAL LIMITED — Investor Meet, 27-01-2025: Analysts/Institutional Investor Meet/Con. Call Updates

Financial Performance: Zomato reported a revenue growth with total revenue reaching ₹1,346 crore, a 15% increase year-over-year. The company achieved a contribution margin of 6.4% from its top stores, reflecting stability amid ongoing competitive pressures. However, increased costs due to higher marketing expenditures led to a slight decline in adjusted EBITDA margins. The earnings per share (EPS) was stable, highlighting resilience despite cost challenges.

Future Outlook and Growth Drivers: Management expressed confidence in future profitability improvements, particularly in quick commerce, citing the maturation of new stores. They anticipate a greater contribution from recently added stores as they stabilize in the next fiscal year. Zomato aims to expand aggressively, with plans for a substantial proportion of new stores in smaller cities showing attractive unit economics.

Order Book and Operational Updates: The order book indicates strong demand, with the company reaching over 1,000 stores ahead of schedule, reflecting its robust expansion strategy. Management emphasized ongoing investments in infrastructure to bolster delivery capabilities and enhance customer service.

Analyst Q&A Insights: Analysts probed the impact of competition on profitability. Management acknowledged a strategic shift, focusing on store maturation rather than aggressive discounting, helping maintain margins without sacrificing market share. Concerns about rising delivery and operational costs were addressed, with management underscoring the importance of efficiency improvements. Capital expenditures for new store openings are projected to continue, potentially leading to short-term losses but positioning for long-term growth.

Strategic Focus Areas: Repeat themes emerged around innovation and infrastructure expansion, particularly in quick commerce. This aligns with broader market trends toward fast delivery options, with management highlighting their commitment to quality service while navigating competitive pressures.

Investor Insight: Given Zomato's current financial health and growth potential, the outlook suggests a 'buy' stance, supported by promising unit economics in new store expansions and a strategic focus on operational efficiency and market leadership in quick commerce. However, vigilance regarding rising costs and competitive pressures remains essential.