- Shares fell 7% in two days, erasing ~₹2 bn in market cap.
- Jefferies pushes price target to ₹480 (street‑high) while Emkay trims it to ₹370.
- Blinkit posted its first positive EBITDA amid intensifying competition.
- CEO Deepinder Goyal exited; Albinder Goyal takes the helm.
- Quick‑commerce revenue is projected to grow ~16% CAGR through FY28.
Most investors ignored the fine print. That was a mistake.
Why Eternal's 7% Drop Signals a Market Realignment
When a stock slides sharply while analysts simultaneously raise price targets, it creates a paradox that forces investors to confront the underlying narrative. Eternal’s market‑cap loss of roughly ₹2 bn is not merely a reaction to a single earnings beat; it reflects a broader re‑pricing of risk in India’s fast‑growing quick‑commerce (QCom) sector. The dip exposes two forces at play: optimism about long‑term unit economics and anxiety over an aggressive “land‑grab” battle among rivals.
Quick Commerce Growth vs. Margin Pressure: The Core Tension
Jefferies’ base case assumes a 16% compound annual growth rate (CAGR) for food‑delivery revenue from FY25‑28. CAGR is the average yearly growth rate that smooths out volatility, offering a clearer view of trajectory than plain year‑over‑year numbers. The firm also values Eternal’s food‑delivery arm at 40× March‑28E adjusted EBITDA and the QCom segment at 2.5× projected revenues. This premium rests on the expectation that scale will unlock cost efficiencies and that customers will keep paying for convenience.
Yet, the same analysts note that margin expansion may be slower. As Emkay points out, during the “land‑grab” phase companies prioritize market share over profitability. When rivals flood the market with discounts, average order value (AOV) can shrink, squeezing EBITDA margins. Eternal’s latest numbers show higher AOV and a shift to first‑party (1P) sourcing, which helped deliver positive EBITDA, but the competitive intensity remains high.
Brokerage Target Divergence: From Rs 370 to Rs 480
Jefferies leads with a ₹480 target, citing the positive EBITDA surprise and the belief that Blinkit’s cost structure will improve as the network scales. Morgan Stanley nudges its target to ₹420 after boosting FY26 adjusted EBITDA forecasts by 20%, while Kotak raises its fair value to ₹410, emphasizing Blinkit’s ahead‑of‑schedule profitability and a robust store rollout (211 new stores in Q3, aiming for 3,000 by March 2027).
In stark contrast, Emkay slashes its target by 14% to ₹370, warning that the influx of new entrants will force Eternal to chase share‑gain at the expense of margins. The spread—nearly 30%—highlights how analysts differ on the timing and sustainability of the QCom profit upside.
Competitive Landscape: How Zomato, Swiggy, and New Entrants Shape the Battle
Zomato’s food‑delivery net‑operating‑value (NOV) grew 16.6% YoY, and its EBITDA margin hit a record 5.4%, indicating that incumbents are also tightening the profit belt. Swiggy, meanwhile, is expanding hyper‑local grocery and “hyper‑pure” services, adding further pressure on Blinkit’s margins. New players, often backed by venture capital, are leveraging aggressive discounting and micro‑fulfilment hubs to capture market share quickly.
For investors, the key question is whether Eternal can defend its niche while scaling. The company’s strategy of moving to 1P sourcing—directly purchasing inventory rather than relying on third‑party sellers—should improve gross margins over time, but the competitive war may compress pricing power in the short run.
Historical Parallel: Past Quick‑Commerce Rallies and Their Outcomes
India’s QCom sector saw a similar inflection point in 2021 when several start‑ups posted their first EBITDA breakeven. Those that survived—most notably Zomato—benefited from deep cash reserves and aggressive logistics networks. Companies that failed to secure scale, such as Grofers (now Blinkit’s predecessor), struggled with thin margins and eventually merged or exited. The pattern suggests that survivorship hinges on two pillars: capital efficiency and the ability to monetize scale.
Investor Playbook: Bull and Bear Cases
Bull Case: If Eternal’s store expansion reaches 3,500‑4,000 outlets by 2028, cost per delivery drops, EBITDA margins climb above 10%, and the 40× EBITDA multiple becomes justified. The positive EBITDA signal indicates that the business model is no longer just a cash‑burn, and the leadership transition to Albinder Goyal could bring operational discipline.
Bear Case: If competition intensifies further—driven by price wars and new entrants—the company may be forced into a margin‑squeeze cycle. Even with higher AOV, aggressive discounting could keep EBITDA below expectations, forcing analysts like Emkay to revise down earnings forecasts and target prices.
For the disciplined investor, the spread in analyst targets creates an opportunity to position size based on risk tolerance. A modest allocation at current levels could capture upside if the bullish scenario materializes, while a tighter stop‑loss protects against the downside of an extended margin‑compression phase.