In a recent note published on April 25, Goldman Sachs analysts have reported that the implied value of Blinkit, the quick commerce delivery platform acquired by Zomato in 2022, has now surpassed that of Zomato’s core food delivery business. The analysts have assigned a $13 billion equity valuation to Blinkit, corresponding to Rs 119 per share, which is higher than the food delivery business’s valuation of Rs 98 per share. This represents a significant upgrade from Goldman Sachs’ previous estimate of $8 billion for Blinkit, attributed to higher gross order value (GOV) estimates. Blinkit’s GOV is now estimated to be tracking around 50 percent higher than estimates from a year ago.
Since its acquisition by Zomato for $568 million in 2022, Blinkit’s implied valuation has grown significantly to $13 billion due to its improved performance. This represents an impressive over 6X growth year-over-year. Goldman Sachs analysts have highlighted that Blinkit’s implied valuation in Zomato’s sum of the parts (SOTP) is now close to $13 billion, compared to $2 billion in March 2023. This translates to an implied per share value of Rs 119, which is higher than the food delivery business’s Rs 98, for the first time.
Goldman Sachs predicts a promising future for Blinkit, forecasting a 53 percent compound annual growth rate (CAGR) in its GOV between the financial years 2024 and 2027. This growth is expected to contribute to a consolidated 32 percent adjusted revenue CAGR for Zomato. Zomato’s projected revenue CAGR is the highest within Goldman Sachs’ food delivery and India internet coverage.
As Zomato continues to enhance profitability, particularly in the quick commerce business, Goldman Sachs anticipates further potential for its valuation multiples to expand. The brokerage emphasizes that Zomato’s EBITDA margin is among the highest among global food delivery platforms, and a similar scenario is expected to play out in the quick commerce business, whose margins can potentially exceed those of the food delivery vertical.
Based on these factors, Goldman Sachs has maintained a ‘buy’ recommendation on Zomato’s stock and raised the price target to Rs 240 from Rs 170. Of the 28 analysts covering Zomato, 24 have a ‘buy’ recommendation, while the remaining have a ‘hold’ rating. The brokerage believes that the market is still under-appreciating Zomato’s growth and profit potential in the online grocery segment. Zomato’s shares were trading at Rs 185.55, up 2 percent, at 12 pm on April 26.
