Eternal’s share price is in focus after a sharp correction over the past few months. While the stock has fallen nearly 40% from its recent highs, domestic brokerage house JM Financial believes the sell-off is perhaps overdone and sees room for meaningful upside from current levels.
In its latest note, the brokerage maintained a ‘Buy’ rating on the company with a price target of Rs 400, implying an upside of over 80% from current levels. According to the report, the optimism comes despite rising competition in both quick commerce and food delivery, as well as broader macro uncertainties.
Here’s a closer look at JM Financial’s investment rationale for Eternal.
Blinkit may anchor the next phase of growth
Quick commerce and competition go hand in hand. Everyone wants a slice of the up-and-coming segment; as a result, big players like Flipkart and Amazon are also scaling up their dark store networks and competing aggressively on pricing and delivery fees.
As per JM Financial, Blinkit remains structurally well-positioned for Eternal. The brokerage highlighted that Blinkit has a clear scale advantage, with over 2,000 dark stores. To understand this better, the number of Blinkit stores is almost twice that of its nearest competitor. Blinkit also has a well-developed supply chain and strong customer retention.
The report further explained that customers are ordering from Blinkit more frequently when compared to the competition, irrespective of discounts. This makes it clear that Blinkit has a stronger brand recall. While growth has moderated slightly due to competition, Blinkit is still expected to deliver low double-digit sequential growth in the March quarter, along with a turnaround in profitability, the report noted.
Profitability likely to improve in the near term
According to the report, after hovering around breakeven in the previous quarter, Blinkit is expected to report a modest improvement in margins, aided by operating leverage as order volumes rise.
JM Financial estimates adjusted EBITDA margins could turn positive at around 0.4% of net order value in the fourth quarter. Over the medium term, profitability could scale meaningfully as the company benefits from better utilisation of its supply chain and an inventory-led model.
Food delivery growth remains steady
Eternal’s core food delivery business is expected to remain resilient, despite concerns around supply disruptions linked to gas availability, the report added. According to the brokerage, such concerns may be overstated given the platform’s diversified restaurant base, which allows customers to switch easily if some outlets face issues.
JM Financial expects food delivery order value to grow around 18% year-on-year in the March quarter, potentially the strongest growth in several quarters. Even in a scenario where disruptions affect a portion of orders, growth could still remain in the mid-teens.
New competition may not disrupt the market immediately
The entry of new players in food delivery has raised concerns about increased competition. However, JM Financial believes these fears may be premature.
Building a viable food delivery business requires not just capital, but also a strong logistics network, deep restaurant partnerships, and sustained brand investments, which means areas where incumbents like Eternal already have a significant lead, the report said.
As a result, new entrants may take time before posing a meaningful threat to market share or profitability, the report noted.
Valuation looks more reasonable after correction
Following the recent decline, Eternal’s valuation has become more attractive relative to its growth prospects. The stock currently trades at around 35 times FY28 estimated earnings, which the brokerage believes does not fully reflect the long-term opportunity in quick commerce and food delivery.
The brokerage firm also stated that the company’s strong balance sheet and net cash position provide flexibility to invest through periods of intense competition.
Conclusion
JM Financial stated that a sharp fall in Eternal’s share price is not because of a real deterioration in the business, but just the market turning cautious. In scenarios like this, competition and the global uncertainties looming over us are major factors to watch. Despite that, the brokerage firm expects improving profitability in Blinkit and steady growth in the food delivery segment, which, when combined, will drive the next segment of growth for the company.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.