The global brokerage house Jefferies is betting big on this online food tech delivery giant. The brokerage has given a ‘Buy’ rating to the stock and set a target price of Rs 480. This translates into an upside potential of 78% from the current market price.
The stock in focus here is Eternal.
In today’s intraday trading, the shares of the company saw a sharp fall. At this hour, the stock is trading nearly 6% lower, and over the past five days, it has declined more than 10%.
Despite this recent weakness, according to the brokerage report, the firm sees strong medium term growth drivers that could support a meaningful recovery ahead.
So why is the brokerage still positive on the stock? Let’s take a look at the key reasons behind the call –
Jefferies on Eternal: Food delivery remains the core strength
According to the brokerage report, management sounded confident about the medium term outlook.
The brokerage house in its report said, “Food delivery is expected to sustain approx. 20% growth with modest margin expansion.”
The company believes demand will remain strong as more consumers prefer ordering food at home. Better execution, disciplined cost control, and operating leverage are expected to support margins.
The brokerage report highlighted that “Food delivery continues to be the cash engine.”
Margins are expected to remain stable or slightly improve over time. The management retained its long term margin guidance of 5-6%.
Jefferies on Eternal: Quick commerce offers big opportunity, but with caution
The second key driver is quick commerce, which refers to ultra-fast delivery of groceries and essentials. According to the brokerage report, “quick commerce total addressable market remains attractive, though competition remains intense, warranting some caution.”
The management noted rising competition, including new entrants. This could affect near term growth at Blinkit, the company’s quick commerce arm.
The report further added, “This clouds the near-term outlook for Blinkit’s growth rates as mgmt. intends to stay disciplined and not follow the easy route of aggressive discounting/promotions.”
Jefferies on Eternal: Profitability concerns addressed
One of the biggest investor concerns has been whether the recent profit numbers are sustainable. According to the brokerage report, “Management confidence remains high on unit economics led by scale, self-help measures, density gains, etc.”
Importantly, the management clarified that “the recent quarter represents true profitability, not aided by any cosmetic measures.”
Jefferies on Eternal: Leadership transition explained
There were also questions around founder Deepinder’s move from Chief Executive Officer (CEO) to Vice Chairman. According to the brokerage report, “Management stressed that the transition was driven by his personal decision to pursue new initiatives, incl Temple, and not due to any operational or strategic issues at Eternal.”
The report further added that there are no plans for stake sale, and his shareholding remains unchanged since the Initial Public Offering (IPO). It also clarified that his decision to forgo unvested Employee Stock Ownership Plans (ESOPs) was based on personal timing preferences.
In addition, management said that “Agentic commerce is still at an experimental stage and does not imply platforms will lose their relevance as ad platform.”
Conclusion
Overall, the brokerage house believes that Eternal’s steady food delivery growth, disciplined quick commerce strategy, and clarity on profitability and leadership provide a foundation for long-term potential.