Buy Eternal; target of Rs 420: Motilal Oswal

Key Investment Pillars

• Stable Food Delivery Business: Eternal's food delivery business remains stable, with management targeting 20%+ annual NOV growth, supported by customer additions and high ordering frequency.
• Blinkit's Accelerating Expansion: Blinkit's store expansion is accelerating, with a raised target of 3,500 stores by Mar'27 and ~5,000 by Mar'28, driven by improving store paybacks and a more predictable competitive environment.
• Path to Higher Margins: Management expects margins to remain broadly flat over the next 1-2 years, with a focus on higher absolute EBITDA rather than margin expansion, as incremental profitability is reinvested in growth.
• Hyperpure and District Progress: Hyperpure revenue grew 12.8% YoY, with adjusted EBITDA turning positive, while District is on track to achieve EBITDA breakeven within the 4-6 quarter guidance.

Thesis Validation Checklist

To validate the investment thesis, watch for:

• Blinkit's Store Expansion: Successful expansion to 3,500 stores by Mar'27 and ~5,000 by Mar'28, with improving store paybacks and margins.
• Food Delivery Growth: Continued 20%+ annual NOV growth in food delivery, driven by customer additions and high ordering frequency.
• Margin Expansion: Gradual margin expansion through store maturity and operating leverage, with a focus on higher absolute EBITDA.
• Hyperpure and District Performance: Continued progress in Hyperpure and District, with improving revenue and profitability.