Eternal Q1 Review: Brokerages Believe Blinkit Doesn't Need Discounting To Win

Eternal Ltd.'s June-quarter earnings may have missed profit estimates, but global brokerages largely remained optimistic, citing strong execution in quick commerce and food delivery while raising their price targets on the stock.

Eternal Q1 Results - Cons, YoY

• Net profit at Rs 92 crore vs Rs 25 crore YoY
• Revenue at Rs 20,211 crore vs Rs 7,167 crore YoY
• EBITDA at Rs 594 crore vs Rs 115 crore YoY
• EBITDA margin at 2.9% vs 1.6% YoY

ALSO READ: Eternal Q1 Results: Profit Rises Over 260% But Misses Estimates; Food Delivery Revenue Up 37%

Jefferies maintained its 'Buy' rating and raised its target price to Rs 415 from Rs 400, saying the quarter reinforced that "quality growth matters more than chasing share." The brokerage highlighted stronger-than-expected profitability in food delivery and said Blinkit's decision to avoid aggressive discounting should support long-term value creation.

Citi also reiterated its 'Buy' call, increasing its target price to Rs 385 from Rs 360. It said Eternal is strengthening its leadership in quick commerce through structural advantages, adding that discounts alone are unlikely to disrupt its competitive position.

Morgan Stanley maintained its 'Overweight' rating and lifted its target to Rs 373 from Rs 347, citing robust execution, steady food delivery momentum and management's confidence that quick commerce margins can eventually settle at the upper end of the 5-6% range.

Macquarie, however, remained cautious. It retained its 'Underperform' rating with a Rs 190 target price, acknowledging improving growth and resilient margins but warning that valuations already reflect optimistic assumptions about the long-term economics of the quick commerce business.

ALSO READ: Eternal Says Current Level Of Quick Commerce Discounting Won't Continue Beyond Near Term

Brokerages on Eternal

Jefferies

• Maintain Buy; Hike target price to Rs 415 from Rs 400.
• Q1 reinforced the view that quality growth is more important than chasing market share.
• Food delivery growth accelerated, with profitability beating expectations.
• The quick commerce business delivered a positive outcome despite missing Jefferies' optimistic forecasts.
• Blinkit is avoiding aggressive short-term discounting, even if that allows competitors to grow faster in the near term.

Macquarie

• Maintain Underperform; Target Price: Rs 190.
• Growth accelerated while margins remained resilient.
• Remains cautious on the overall economics of the quick commerce business.
• Believes current valuations already price in much of the expected upside.

Citi

• Maintain Buy; Hike target price to Rs 385 from Rs 360.
• Believes Eternal is strengthening its leadership in quick commerce through multiple structural advantages.
• Expects discounting alone to be insufficient to disrupt its market position.
• Sees further growth through deeper expansion into Tier-II and Tier-III cities.
• Management's commentary on competition reflects greater confidence in Eternal's differentiated positioning.

Morgan Stanley

• Maintain Overweight; Hike target price to Rs 373 from Rs 347.
• Strong execution continues to reinforce conviction.
• Expects steady momentum in both food delivery and quick commerce net order value (NOV).
• Management's strategy to sustain growth regardless of competitive intensity was encouraging.
• Believes quick commerce steady-state margins can reach the upper end of the 5-6% range.
• Strong Q1 results and management commentary have led to higher estimates.
• Good execution should strengthen confidence in management's outlook.
• While the stock has rallied since mid-June, Morgan Stanley still sees scope for further re-rating.

ALSO READ: Eternal Q1 Results: Blinkit, Margins, Competition And More — 10 Things Investors Should Know

Source: NDTV Trending