Eternal’s growth to be driven by Blinkit expansion and improving profitability, says JM Financial

Synopsis: JM Financial has maintained a BUY rating on Eternal, and they believe that the recent decline of around 40% in the company’s shares from its peak is largely attributable to concerns over leadership issues, rising quick commerce competition, and global macro issues such as developments in AI and tensions in the Middle East.

JM Financial believes that while global macro issues are hard to predict, it believes that Eternal, and particularly Blinkit, is likely to emerge stronger once the macro environment normalizes. They believe that in the fourth quarter of FY26, Blinkit’s net order value is likely to increase in low double digits quarter-on-quarter, driven by mid-teen order volume growth, alongside an improvement in adjusted EBITDA margin to 0.4%. 

They have maintained a price target of ₹400 and believe that this is a good time to buy the company’s shares, which are currently trading at 35 times its earnings for FY28, and a 12-18 month perspective is required to accumulate this stock.

Blinkit’s Position in Quick Commerce

JM Financial feels that Blinkit has the strength to cope with the rising competition in the quick commerce space. Overall, the space is growing as consumers are moving from traditional retail, modern trade, and kirana stores to quick commerce. However, the competition has become fierce with companies offering discounts, lower order value requirements, and minimal delivery charges. 

According to reports, Flipkart’s Minutes is opening almost 100 dark stores every month, while Amazon’s Now is opening two stores daily. However, Blinkit has the strength to cope with this due to its scale advantage, with 2,027 dark stores and warehousing space of 6.2 million square feet. It also has a large customer base of 23.6 million monthly transacting users and order frequency of almost 3.5 times a month even without discounts. However, the brokerage firm expects Blinkit to report almost 80% NOV growth in FY27 provided macro conditions are stable.

Blinkit Growth and Profit Outlook

For the fourth quarter of FY26, Blinkit is likely to report a sequential increase of 11% in NOV, driven by strong order volume despite fewer operating days compared to the previous quarter. There might be a marginal impact on average order value due to seasonality, but this is likely to improve in the March quarter.

The brokerage firm is expecting a sharp improvement in adjusted EBITDA, with a profit of around ₹0.6 billion compared to breakeven in the previous quarter. This is expected to improve due to operating leverage, better supply chain utilization, and an inventory-led model. JM Financial estimates that Blinkit’s adjusted EBITDA is likely to improve to around ₹18 billion in FY27, which is better than market expectations.

Food Delivery Business Outlook

In the food delivery segment, the brokerage believes that the disruption risk on the supply side due to the gas availability factor is overstated. As the brokerage states, “Unless there is a complete shutdown like the COVID scenario, customers can always move to the operational restaurants. We expect around 18% YoY NOV growth for the food delivery business in Q4FY26 for Zomato, which will be the highest in the past seven quarters.” The brokerage believes that even if 25% of the orders get disrupted in the final weeks of the quarter, the business will still grow by around 15% YoY.

Financials and Valuation

JM Financial has maintained their BUY recommendation with a target price of Rs. 400, suggesting a potential upside of around 85% from the current levels. They have slightly reduced their target valuation multiple to factor in global macro and competition risks. However, they believe the company’s long-term growth story remains intact. Strong growth in Blinkit, steady food delivery business, and improving profitability are expected to drive the company’s future performance. 

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Trade Brains Technologies Private Limited or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.

The post Eternal’s growth to be driven by Blinkit expansion and improving profitability, says JM Financial appeared first on Trade Brains.