On Friday, ICICI Securities analyst Abhisek Banerjee updated the firm's outlook on Zomato (NS:ZOMT) Limited (ZOMATO:IN), increasing the price target to INR 310 from INR 300. The analyst reaffirmed a Buy rating on the stock, expressing confidence in the company's long-term investment potential despite the competitive challenges in the quick commerce sector.
The rationale behind the raised price target reflects the analyst's belief that the rapid expansion of dark stores by incumbents in the quick commerce space is creating significant barriers to entry for competitors. This strategic move is expected to be advantageous in the medium term, as it could solidify Zomato's market position.
Abhisek Banerjee acknowledged the risks associated with the aggressive growth strategy, particularly the execution risk due to the high standards Zomato has previously set. However, the firm's stance remains positive, viewing the recent dip in Zomato's stock price as an opportunity for investors to acquire shares of a leading player in the Indian hyper-local e-commerce market.
The price target adjustment was accompanied by a detailed sector note that highlighted the challenges and opportunities within the quick commerce industry. ICICI Securities' analysis suggests that while profitability timelines have been pushed back for companies in this space, the strategic build-out of dark stores is a critical factor in maintaining competitiveness.
In conclusion, ICICI Securities maintains its Buy rating on Zomato, with the revised price target of INR 310 reflecting a roll-forward of their discounted cash flow (DCF) analysis. The firm's outlook is based on Zomato's potential to navigate the competitive landscape and maintain its leadership in the Indian market.
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