The brokerage expects the online food delivery industry to grow at 30% on a compounded basis in the next 10 years due to increasing out-of-home food consumption and the rising share of online delivery. This growth will be driven by trends such as rising income and higher proportion of working women along with rising internet penetration, it said.
Shares of Zomato ended up 1.17% at Rs 143.20 on Monday.
“We expect India’s food delivery market to see a 30% CAGR (compounded annual growth rate) in FY20-FY30, to $45 billion in FY30 and contribute to 21% of the out of home food consumption,” said Credit Suisse in a note to clients.
The brokerage expects Zomato’s food delivery business to see around 50% compounded annual growth over FY21-FY26 as it comes out of the adverse impact of the Covid pandemic. Unit economics are likely to gradually improve after FY22 due to scale and breakeven on the operating front is likely to happen by FY25, said Credit Suisse.
The Zomato stock is up 88.4% from its IPO price of ₹76 within two months of listing on July 23.
Earlier this month, Kotak Institutional Equities initiated coverage on Zomato with a buy rating and a target price of Rs 175.
The brokerage too, expects a strong compounded growth in Zomato's earnings.
“Zomato’s leadership position in the under-penetrated food-delivery space will drive healthy revenue CAGR of 36% over FY21-30. Turnaround in unit economics will lead to profitability by FY25, leaving Zomato with the bulk of its current around $2 billion cash balance intact, which can drive the company’s entry into fresh adjacencies enabling further value creation,” said Kotak.
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