Eternal Soars as Blinkit Hits Breakeven, Eyes on Rising Costs

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AuthorRiya Kapoor|Published at:
Eternal Soars as Blinkit Hits Breakeven, Eyes on Rising Costs
Overview

Eternal reported a robust 20.7% sequential revenue increase to INR 163 billion in Q3 FY26, propelled by exceptional growth in its quick commerce arm, Blinkit. The highlight was Blinkit achieving adjusted EBITDA breakeven for the first time, a significant operational milestone. Despite the strong quarterly performance and a reiterated BUY rating from Motilal Oswal with an INR 360 target price, the brokerage trimmed its FY27/28 profit estimates by approximately 15%, signaling concerns over escalating competition and investment costs.

The strong top-line performance was complemented by improving operational metrics across the board. Eternal's core food delivery business saw its adjusted EBITDA margin as a percentage of Net Order Value (NOV) increase by 10 basis points quarter-over-quarter to 5.4%. However, the market's focus was squarely on Blinkit, which not only posted a staggering 120% year-over-year growth in NOV but also reached adjusted EBITDA breakeven, outperforming analyst expectations of a loss. This achievement was credited to supply-chain efficiencies and growing operating leverage.

### The Cost of Dominance

Despite the positive results which initially saw the stock jump, investor enthusiasm is being tempered by the forward-looking outlook. Motilal Oswal's decision to reduce future earnings estimates by 15% points directly to the escalating costs of leadership in the quick commerce space. The battle for market share against rivals like Swiggy's Instamart and Zepto necessitates continued, heavy investment in dark store expansion, marketing, and promotional activities. Eternal added 211 net new Blinkit stores during the quarter, taking its total to 2,027, and plans to reach 3,000 by March 2027, a capital-intensive endeavor. This land-grab phase in a sector projected to reach nearly $7 billion in 2026 may force the company to prioritize market share over short-term profitability.

### A Sector at an Inflection Point

The Indian quick commerce industry is expanding rapidly, but questions around a sustainable profit model persist, a sentiment echoed even by major players like Amazon. While Blinkit achieving breakeven is a positive signal, it comes at a time of significant change for Eternal, including the recent announcement that founder Deepinder Goyal will step down as CEO. This leadership transition, combined with rising competitive pressure, has introduced new variables for investors. Analysts largely maintain a 'Buy' consensus on the stock, with an average target price around INR 370-380, but they consistently flag the high-burn nature of quick commerce as the primary risk. The company's ability to maintain its growth trajectory while managing costs will be critical in justifying its premium valuation and achieving the projected 1.6% to 2.0% profit after tax margins in the coming fiscal years.

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