Zomato - Can Margins, Multiples Surprise? ICICI Securities Initiates Coverage
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ICICI Securities Report
Our channel checks at 150 plus restaurants in 16 cities (seven/ nine from top-20 / Next-500) hint at three key trends -
congruent menu prices across Zomato, Swiggy and direct ordering apps (up 14% versus dine in),
potential for surprise on discounts (less than Rs 15 / order which is our base case) and
increase in delivery fee (Rs 33 / order, up 22% YoY).
This strengthens our conviction that industry will remain a duopoly with discount, cost discipline and demand inelasticity.
Maturing customer cohorts, restaurants (especially in Next 500) and delivery dynamics will likely lead a ‘J’ shaped improvement in unit economics over FY21-23E.
Our deep dive into the regulatory framework suggests Zomato is one of the least vulnerable internet companies across the world for a regulatory tech-lash.
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