Zomato’s stock is currently trading c.21% below its all-time highs on the back of growing investor concerns about 1) accelerated investments in Blinkit’s supply chain (dark store and warehouse network), and 2) rising competitive pressures in quick commerce. While these concerns have merit, we believe the impact on Blinkit’s adjusted EBITDA margin (as % of GOV) may not be meaningful, and the deviation from near-term guidance of break-even levels will be limited to ~100bps as % of GOV (and could be temporary as well).
Further, brokerages believe supply chain investments should help Blinkit better compete with emerging competition. “Zomato, in our opinion, is the most resilient company in the quick commerce space due to its: a) strong market leadership, b) demonstrated history of strong execution capabilities, and c) robust balance sheet. We, therefore, strongly suggest that long-term investors should use the recent market pessimism in the stock to build sizable positions,” said JM Financials.

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