Eternal Q2 Result Review: Brokerages Split On Zomato Parent Post Q2 Beat

Brokerages are mixed on Eternal Ltd., the parent company of Zomato, following its September quarter earnings. While Bank of America and UBS reiterated their bullish stance citing strong revenue growth and positive guidance, Macquarie remained cautious, flagging concerns over profitability and competitive pressures.

Q2 Results: Revenue Surges, Profit Slumps

Eternal’s Q2 revenue surged nearly threefold to Rs 13,590 crore, beating analyst estimates, but net profit fell 63% year-on-year to Rs 65 crore due to higher inventory costs.

Here are the key highlights from Eternal’s Q2 results:

• Revenue at Rs 13,590 crore versus Rs 4,799 crore (Bloomberg estimate: Rs 8,665 crore)
• EBITDA up 5.8% at Rs 239 crore versus Rs 226 crore (Estimate: Rs 236 crore)
• Margin at 1.8% versus 4.7% (Estimate: 2.7%)
• Profit down 63% at Rs 65 crore versus Rs 176 crore (Estimate: Rs 108 crore)

Brokerage Views: Mixed Bag

Bank of America and UBS have reiterated their Buy calls on Eternal, citing strong revenue growth and positive guidance. On the other hand, Macquarie has maintained its Underperform rating, citing concerns over profitability and competitive pressures.

Here are the detailed views from various brokerages:

Bank of America

Reiterate Buy with target price of Rs 400. Believe commentary from con-call was positive. Believe QC losses slightly higher than most investor expectations. Management expects to get to 2,100 stores by Dec’25 vs 2,000 earlier. Consider this prudent strategy when competition not adding dark stores.

UBS

Reiterates Buy on favorable risk-reward. Maintain Buy with target price of Rs 400. Strong numbers with positive guidance across segments. QC NOV growth expected to be 100% for next 1-2 years. Focus remains on growth, not immediate Ebitda breakeven. NOV growth expected around 30% YoY. Margins set to improve and losses to remain range-bound near term.

Macquarie

Maintain Underperform with target price of 200. Painted optimistic yet measured outlook in Sept-Q earnings call. Constructive on TAM potential, but the face of rising competitive intensity. Believe consensus overstates the turnaround and sustainability of profitability. Fundamentals don’t support US$40bn market cap (120x FY28 EV-Ebitda).

Other Brokerage Views

Other brokerages have also shared their views on Eternal’s Q2 results. ICICI Securities has maintained its Buy call with a revised target price of Rs 430 versus Rs 330 earlier. Kotak Securities has retained its Buy call with a revised target price of Rs 400 versus Rs 320 earlier.

Conclusion

In conclusion, Eternal’s Q2 results have been a mixed bag, with strong revenue growth but a slump in profitability. Brokerages are divided on the stock, with some reiterating their bullish stance while others remain cautious. Investors should keep a close eye on the company’s future performance and guidance before making any investment decisions. To learn more about stock market analysis and investment strategies, visit our website.