Should you buy Eternal despite high competition from its peers?

Synopsis: Eternal​‍​‌‍​‍‌​‍​‌‍​‍‌ has attracted attention after Jefferies assigned a ₹480 target, pointing out a solid long-term growth perspective in quick commerce and food delivery, significant barriers to entry, and a rise in profits even if there are some fluctuations in the short ​‍​‌‍​‍‌​‍​‌‍​‍‌term.

The shares of Eternal, the parent of food aggregator Zomato, are in focus after Jefferies projects a strong 70 percent upside from its current level. In this article, we will try to understand the rationale behind this uptick.

With a market capitalisation of Rs 2,71,175 crore, the shares of Eternal Ltd are trading at Rs. 282, down 1.30 percent from its previous day’s closing price of Rs 284.80 per share.

Analyst Comments

Leading global brokerage, Jefferies, has assigned a target price of Rs 480 per share on Eternal, signalling an upside potential of 70 percent from its current market price. Jefferies​‍​‌‍​‍‌​‍​‌‍​‍‌ cited that Eternal is ideally positioned to evolve with the long-term growth of India’s quick commerce and the food delivery market.

The brokerage feels that although competition noise has risen due to the fundraises by competitors and the IPO talk of the new players, it is very unlikely that this will result in an aggressive price war.

Those players that are listed will be under scrutiny to demonstrate profitability, and new entrants will have to show a clear way to profits before they can scale rapidly, thus cutting back on the reckless discounting.

One more key factor behind Jefferies’ confident stance on this matter is the high barrier to entry in the quick commerce sector. Large horizontal players such as Amazon, Reliance, and Flipkart have not been able to make a significant impact in the ultra-fast deliveries market, as users do not readily think of them as the solution for this particular need. 

For example, Amazon faced challenges with its adoption, Swiggy also faced challenges when it launched its standalone quick commerce app (Instamart), and many more. Therefore, the position of the players, like Eternal, becomes safer since it takes time for scale, dark-store density, and customer habits

Jefferies also pointed out that near-term losses concern, especially at Blinkit. They consider such losses as a deliberate growth-first strategy, mainly store expansion at a rapid pace, rather than a structural issue. Most importantly, the brokerage thinks that Eternal is very powerful in switching to profitability when the expansion slows down, even though this move may not be liked by short-term investors.

Talking about food delivery, Jefferies thinks that although the growth has slowed down to the mid-teens (16-17 percent), it is cyclical and is linked to the general demand for urban areas. The brokerage is still optimistic about the segment as it is a high-return-on-capital business with low capex and working capital requirements, which in the long run, will be the reason for premium valuations.

Financial and Other Highlights

Eternal reported a core revenue of Rs 13,590 crore in Q2 FY26, a staggering growth of 183 percent as compared to Rs 4,799 crore in Q2 FY25. Coming to its operating profit, it reported an adjusted EBITDA of Rs 224 crore in Q2 FY26, a decline of 32 percent as compared to Rs 330 crore in Q2 FY25. Regarding its profitability, it reported a net profit of Rs 65 crore in Q2 FY26, a decline of 63 percent as compared to Rs 176 crore in Q2 FY25. 

On a year-on-year basis, Eternal’s businesses delivered strong growth across most segments. Food delivery revenue grew 22 percent, showing steady demand. Quick commerce grew by a staggering 756 percent, driven by rapid scale-up and higher order volumes. The going-out segment rose 23 percent, reflecting recovering consumer activity. 

However, B2B supplies (Hyperpure) fell 31 percent YoY, indicating a slowdown in that vertical. Overall, the company’s adjusted revenue jumped 172 percent YoY, led primarily by explosive growth in quick commerce.

In conclusion, Jefferies’ Buy call, accompanied by a 70 percent upside, is led by Eternal’s solid quick commerce position, little competitive risks, business model that can be scaled, and the potential of long-term profitability in spite of near-term ​‍​‌‍​‍‌​‍​‌‍​‍‌volatility.

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