The Eternal share price has been in focus. Global brokerage Jefferies has predicted a sharp upside potential in this quick commerce and food delivery stock. It has assigned a Buy rating with a target price of Rs 480, which implies an upside of about 61% from current market levels.
According to the brokerage report, the view is based on the company’s position in the quick commerce and food delivery segments, along with expectations that competitive pressures may remain manageable over the medium term.
Let’s take a look at the 5 key factors behind the brokerage call –
Jefferies on Eternal: Competitive noise may not turn into a price war
Recent capital raises by Swiggy and talk of a possible Zepto initial public offering (IPO) have raised worries about aggressive competition. However, according to the brokerage report, these developments may not necessarily lead to irrational pricing. Jefferies pointed out that “Swiggy, being listed, faces pressure to avoid irrational behaviour,” while Zepto’s listing plans depend on showing a “credible path to profitability.”
Jefferies on Eternal: New entrants face scale and adoption challenges
The quick commerce space, which focuses on very fast deliveries, is attracting interest from large horizontal players such as Amazon, Reliance and Flipkart. Jefferies believes scaling up in this segment is not easy.
According to the report, “users do not associate horizontals with Q/C,” referring to quick commerce, and this slows adoption.
Jefferies noted that Amazon’s integration of quick delivery into its main app has faced adoption challenges, similar to what was seen when Swiggy moved Instamart to a standalone app. Reliance JioMart’s quick commerce efforts are currently more focused on smaller towns, while Flipkart’s expansion has also been gradual. All of this suggests that incumbents like Eternal are unlikely to see sudden disruption.
Jefferies on Eternal: Blinkit’s growth-first strategy explains near-term losses
Jefferies noted that Blinkit’s near-term losses are linked to aggressive store expansion. This, according to the brokerage, is a deliberate strategy rather than a structural weakness.
Jefferies’ report added that Blinkit’s “ability to pivot towards profitability is high,” but added that the current growth-first approach may not appeal to short-term investors.
Jefferies on Eternal: Seasonal factors and GST changes may affect December quarter
Jefferies also flagged some near-term headwinds. According to the brokerage report, the December quarter could see some impact due to changes in festive season timing and Goods and Services Tax (GST) adjustments. The report noted that “there may be some nuisances due to shift in festive season as well as GST cuts,” which could affect year-on-year and quarter-on-quarter growth numbers.
Jefferies on Eternal: Food delivery valuation still supported by business quality
Growth in the food delivery segment has moderated to around 16-17%, which has led to questions about valuation. Jefferies highlighted this slowdown but pointed out that it may be cyclical, especially given the broader urban consumption slowdown. The brokerage added that food delivery remains a high return-on-invested-capital business due to low capital expenditure and limited working capital needs.
According to the report, “with limited capex and w/capital requirement, FD is high ROIC business and hence, should enjoy premium valuation.”