CLSA has revised its stock rating for Zomato to 'outperform' due to valuation concerns, while maintaining a positive outlook on the company's long-term prospects. This outlook is driven by expectations of increased disposable incomes and order frequency, according to the announcement made on Friday.
Despite Zomato's impressive performance, outpacing the Sensex with a gain of over 107% since April, analysts predict a potential demand slowdown in the second quarter of FY24. The anticipated boost from the Cricket World Cup 2023 is already factored into the company's current price.
Analysts from Jefferies and Way2Wealth expect the Cricket World Cup event to increase restaurant consumption, which would benefit Zomato. The event is expected to stimulate consumer spending and drive growth for companies in the food delivery sector.
In addition to revising the stock rating, CLSA also adjusted its target price for Zomato to Rs 120, reflecting changes in profitability assumptions. While CLSA predicts a slowdown in revenue growth for consumer companies in FY24 due to weak volumes and increased advertising spending, it anticipates a positive impact from an extended festive season for Staples and Discretionary companies.
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