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Dolat Capital Report
Eternal Ltd. remained under the spotlight after Dolat Capital retained its ‘Sell’ rating on the stock and maintained a target price of Rs 200, implying nearly 30% downside from the current market price of Rs 284, despite the company reporting a strong revenue performance in the June quarter.
The brokerage said Eternal delivered a revenue beat in Q1 FY27, driven primarily by robust growth in its quick-commerce arm Blinkit.
However, profitability remained below expectations, with Ebit of Rs 48 crore significantly lagging Dolat Capital’s estimate due to higher depreciation, ESOP costs and increased investments across growth initiatives.
Valuation
Eternal continues to lead the quick commerce segment in India, with aggressive store expansion, and over the past four quarters, has demonstrated sustained profit at adjusted Ebitda level as well as margin expansion, supported by healthy unit economics.
Eternal also maintains its leadership in food delivery, while the going-out business is also witnessing rapid expansion.
The brokerage continue to expect healthy growth in all of the variables (orders, average order value, monthly transating user, new user acquisition) but also note continued intense competition in quick commerce, ongoing investments in Going-Out and other initiatives such as Bistro/Nugget continuing to remain in the red.
With business model shift completing a year, revenue compound annual growth rate is expected to be at 45.4% over FY27-30E and expect it to normalise at ~14% CAGR over FY30-40E in the second growth stage with an average Ebit margin of ~4% over FY27-FY40E, cost of capital of ~11% and terminal growth rate of ~3%.
Taking these assumptions and noting expensive valuations, Dolat Captial maintains ‘Sell’ rating on Eternal with target price of Rs 200 (implies ~84 times of FY28E earnings).
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ALSO READ: Eternal Says Current Level Of Quick Commerce Discounting Won’t Continue Beyond Near Term
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