ETERNAL - Investment Analysis: Buy Signal or Bull Trap?

Last Updated Time : 19 Sept 25, 2:16 pm

Investment Rating: 3.6

📦 Long-Term Investment Analysis: Eternal Ltd (Zomato Parent)

Eternal Ltd has shown remarkable growth in market cap and revenue, driven largely by its quick commerce arm Blinkit. However, its valuation metrics and profitability ratios suggest caution for long-term investors.

✅ Strengths

Revenue Growth: Annual revenue surged from ₹1,994 Cr (FY21) to ₹20,243 Cr (FY25), with Q1 FY26 revenue at ₹7,167 Cr

1

.

Profit Turnaround: Net profit improved from a loss of ₹816 Cr (FY21) to a profit of ₹527 Cr (FY25). Q1 PAT stands at ₹602 Cr

1

.

Low Leverage: Debt-to-equity ratio of 0.01 ensures financial flexibility.

Strong Momentum: RSI at 69.1 and MACD positive — technically bullish.

DII Confidence: Domestic institutional holdings increased by 3.02%, signaling long-term belief

2

.

⚠️ Risks & Weaknesses

Extreme Valuation: P/E of 155 vs industry average of 37.7; PEG ratio of 3.09 suggests overvaluation

1

.

Weak Profitability: ROE at 6.55% and ROCE at 7.34% are below ideal levels for long-term compounding.

No Dividend: Dividend yield is 0%, making it unattractive for income investors.

FII Pullback: Foreign institutional investors reduced holdings by 2.02%

2

.

EPS Still Low: At ₹2.21, earnings are yet to catch up with valuation.

🎯 Ideal Entry Price Zone

To mitigate valuation risk

Accumulation Zone: ₹290–₹310

This aligns with the 50 DMA (₹307) and offers a buffer below current highs.

Avoid fresh entry above ₹330 unless Blinkit’s EBITDA breakeven (expected by Dec 2025) materializes

3

.

🧭 Exit Strategy / Holding Period

If you're already holding

Holding Period: 2–3 years, contingent on Blinkit’s margin expansion and profitability.

Exit Strategy

Partial Exit: Near ₹360–₹377 (RR2–RR3 levels) if valuation remains stretched

4

.

Full Exit: If ROE stagnates below 7% or PEG exceeds 3.5 for 2+ quarters.

Re-evaluate: If Blinkit fails to meet breakeven targets or competitive pressure intensifies.

📌 Analyst Sentiment

Goldman Sachs Target: ₹360 (10% upside), bull-case at ₹488 (44% upside)

2

3

.

Market Cap Surge: Eternal now ranks among Nifty50’s top 25, ahead of Titan, Tata Motors, and ONGC

5

.

Stock Performance: Up 72% from 52-week low; 61% in 6 months; 28.9% in 3 months

5

.

Eternal is a high-growth, high-risk play. Ideal for aggressive investors who believe in the quick commerce story — but not for conservative long-term holders seeking stable compounding.

Would you like a peer comparison with Nykaa or Paytm to evaluate alternatives?

Sources

2

3

1

5

4

1

Moneycontrol

2

Moneycontrol

3

CNBCTV18

4

www.finosauras.com

5

Goodreturns

Edit in a page