This is why HSBC feels Zomato could rise 64%; should you buy?
Live MintShares of food delivery major Zomato rose nearly 1 per cent in Wednesday's trade after analysts at HSBC Global Research said they expect the stock to hit ₹87 going ahead, implying an upside potential of 64 per cent from the current levels. The brokerage said it values Zomato using a DCF model, employing a WACC of 10.5 per cent based on our assumptions of a risk-free rate of 2 per cent, an inflation differential of 2.5 per cent, a beta of 1.1, and a market risk premium of 5.5 per cent. We believe consensus expectations are now a lot more realistic although they still need adjustments to bring the medium-term growth rate forecasts closer to 10 per cent for the food delivery GOV over the longer term, which, in our view, is achievable," the note said. We expect FD Gross Order Value to grow c9% y-o-y in 4QFY23, below our medium-term expectation of 15%," HSBC said, adding this seems disappointing, but there are several silver linings for Zomato investors.