Shares of Eternal Ltd, the company behind popular delivery platforms Zomato and Blinkit, have surged 34% since their March low, including a 4% rise on Thursday. This robust performance has led a significant majority of analysts to maintain a bullish outlook, with 27 out of 29 recent recommendations classifying the stock as 'Buy,' 'Outperform,' or 'Overweight.'
Analysts Project Significant Upside
The consensus target among analysts suggests an upside of over 20% from the stock's current price. Notably, CLSA analyst Aditya Soman set the highest post-Q1 target at Rs 506, indicating a potential 75% upside from Thursday's trading price of Rs 289.90 per share.
Other prominent bullish calls include Jefferies' Vivek Maheshwari, who suggested a target of Rs 415, and Gaurav Malhotra of Axis Capital, who sees Eternal reaching Rs 405 per share. Analysts at JM Financial, Emkay Global, and Elara Securities each set a target of Rs 400 for the Eternal stock.
Key Drivers of Positive Sentiment
Several factors contributed to the positive analyst sentiment following Eternal Ltd's first-quarter results:
- Food Delivery Performance: ICICI Securities highlighted a 20% year-on-year (YoY) net order value (NOV) growth in the Food Delivery segment as a positive surprise. The brokerage also noted sustained improvements in profitability despite ongoing growth investments, indicating a healthy business model.
- Quick Commerce Efficiency: Management's indication of tight inventory control resulted in significantly lower net working capital (NWC) requirements in Q1, complemented by scale benefits and supply chain optimization. Nomura India cited improving Quick Commerce (QC) profitability despite intense competition, raising its target for Eternal.
- Long-Term Margin Outlook: MOFSL noted that Eternal's business model is now established and competition is becoming more predictable. Management anticipates structurally higher margins going forward, with a long-term target of 60% NOV growth and $1 billion in EBITDA by FY29, which MOFSL believes is increasingly achievable.
Brokerage Adjustments and Future Outlook
JM Financial maintained its Food Delivery NOV estimates for FY27–29E while increasing its adjusted EBITDA forecast by 2–3% due to better-than-expected Q1 margins. For Blinkit, JM Financial raised FY27–29E NOV by 1–9% based on a sharp increase in order volumes and monthly transacting users (MTU) base.
Elara Securities, while not expecting a material near-term re-rating in valuation multiples, believes sustained execution on profitability will drive medium-term upside. The firm also projects that Blinkit's advertising revenue, currently highest among peers, could incrementally contribute Rs 2,000 crore to EBITDA by FY28E, even without changes in current unit economics, bolstering confidence in execution.