ETERNAL - Investment Analysis: Buy Signal or Bull Trap?

Last Updated Time : 05 Nov 25, 7:43 am

Investment Rating: 3.5

📦 Eternal Ltd (formerly Zomato) shows strong top-line growth and market leadership in quick commerce, but its high valuation and modest return ratios make it a speculative long-term bet. Investors should be cautious and consider entry only near support zones.

📈 Positive

• 📊 Strong Revenue Growth: PAT increased from ₹602 Cr. to ₹691 Cr., with a quarterly profit variation of 64.1%

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• 📉 Low Leverage: Debt-to-equity ratio of 0.01 reflects a healthy balance sheet.
• 📈 High Liquidity: Volume of 3.55 Cr. shares traded, well above the weekly average, shows strong market interest

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• 📈 DII Confidence: DII holdings increased by 3.55%, indicating domestic institutional optimism

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⚠️ Limitation

• 📉 Overvaluation: P/E of 131 and PEG of 2.61 are significantly above industry averages (PE: 30.2), suggesting limited upside

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• 📉 Weak Return Metrics: ROCE at 7.34% and ROE at 6.55% are below ideal levels for long-term compounding.
• 📉 No Dividend Yield: 0.00% dividend limits passive income potential.
• 📉 Bearish Technicals: RSI at 36.1 and MACD at -1.09 indicate weak momentum

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📰 Company Negative News

• 📉 FII holdings dropped by 3.30%, reflecting reduced foreign investor confidence

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• 📉 Some brokerages downgraded the stock from “Buy” to “Hold” due to valuation concerns

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🌟 Company Positive News

• 🚀 Blinkit’s rapid expansion and Eternal’s reinvestment strategy are driving top-line growth despite profit fluctuations

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• 📈 Analysts maintain a long-term target of ₹358.67, suggesting ~12% upside from current levels

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🏭 Industry

• 🛒 Operates in the online food delivery and quick commerce space, which is growing rapidly in urban India.
• 📉 However, the industry faces intense competition, thin margins, and high customer acquisition costs.

📌 Conclusion

• ✅ Ideal Entry Zone: ₹280–₹300, near the 200-DMA (₹283) for better valuation and risk-reward.
• 🕰️ Holding Strategy: If already invested, hold for 2–3 years and monitor ROE/ROCE improvements and Blinkit’s profitability.
• 🚪 Exit Strategy: Consider trimming above ₹360 or if valuation remains high without matching earnings growth.

Sources

hellosafe.in

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