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Eternal Ltd Posts Strong Q4, Annual Profit Declines
Eternal Ltd., the parent company of Zomato and Blinkit, reported a strong fourth quarter for fiscal year 2026, but saw its annual profit decrease. The company's net profit jumped 346% year-on-year to ₹174 crore in the March quarter, with revenue growing 196.5% to ₹17,292 crore. However, its full-year profit for FY26 fell 31% to ₹366 crore, down from ₹527 crore the previous year.
Blinkit Drives Growth with Improved Margins
Blinkit, the quick commerce arm, was a key growth driver. Its Net Order Value (NOV) increased 95.4% year-on-year. Importantly, its adjusted EBITDA margin improved to 0.3% (from -0.3% last quarter), reaching a profit of ₹37 crore. This improvement stems from strategic changes like adopting an inventory-led model and better store use, which aim to enhance unit economics. Blinkit contributes significantly to revenue, but faces rising competition from JioMart and Swiggy's Instamart. JioMart is growing quickly using Reliance's retail network, while Swiggy also aims for profitability.
Zomato Delivers Steady Food Delivery Growth
Eternal's core food delivery business, Zomato, showed steady growth, with NOV up 18.8% year-on-year. The segment maintained a healthy adjusted EBITDA margin of 5.5%. This performance demonstrates resilience against economic challenges and cost pressures. However, analysts are watching for increased competition and potential pressure on fees as services like Swiggy One expand.
High Valuation Raises Concerns Despite Strong Quarter
Despite the impressive quarterly results, Eternal Ltd. faces intense scrutiny over its valuation. Its Price-to-Earnings (P/E) ratio is extremely high, reported between 97.56 and over 1,000, a stark contrast to the industry average of about 21.14. This high valuation suggests investors expect strong future growth, which the annual profit decline could challenge. This gap raises questions about the sustainability of its ₹2.44 lakh crore market value.
Intense Competition and Market Challenges
The broader e-commerce and quick commerce markets are expanding significantly, favoring Eternal's growth strategy but also increasing competition. Consumer discretionary firms are seeing revenue growth, but margins are squeezed by higher costs and inconsistent rural demand. Investec noted Eternal's strong execution and clear path to profitability in quick commerce, preferring it over Swiggy. Still, the overall market is balancing growth and efficiency, with investors looking for diversified value.
Key Risks for Investors
Investors should be cautious about several factors. The drop in full-year FY26 profit, despite a strong Q4, suggests possible margin pressures or higher investment costs affecting future profits. The company's very high P/E ratio amplifies risk, making it vulnerable to market shifts or execution errors. Fierce competition in both food delivery and quick commerce requires ongoing investment, which could impact future earnings. Additionally, regulatory attention and changing consumer habits amid inflation may slow growth projections.
Analysts Remain Bullish on Eternal Ltd.
Despite these risks, analysts are mostly optimistic. HDFC Securities kept its "Buy" rating with a ₹340 target. Investec initiated coverage with a "Buy" and a ₹375 target, citing Eternal's strong execution. Overall, over 30 analysts rate the stock a "Buy," with an average 12-month price target around ₹359.06, implying potential upside of over 40%. This outlook is based on expectations of continued growth and improving profitability in quick commerce.