Buy Eternal: target of Rs 425: ICICI Securities

Moneycontrol • 10 days ago

Original source

Key Investment Pillars

  • Quick Commerce (QC) Expansion: Eternal's management has upgraded its store expansion guidance to over 3,500 stores by Mar'27 and ~5,000 stores by Mar'28, with a focus on smaller cities where store payback and margins are tracking well.
  • Food Delivery (FD) Growth: FD growth continued to accelerate in Q2FY27, driven by 16% YoY growth in MTUs and new user additions, with management maintaining its long-term FD growth guidance of 20%.
  • Margin Improvement: Management expects adjusted EBITDA margins to improve alongside expansion, with mature cities already generating adjusted EBITDA margins of over 5%.
  • New Initiatives: The company is also launching Dark.AI, an end-to-end, privacy-focused assistant for power users, which is still at a nascent stage.

Thesis Validation Checklist

To validate the investment thesis, investors should watch for:

  • Store expansion and ramp-up: The ability of Eternal to expand its store network and ramp up new stores, particularly in smaller cities.
  • Margin improvement: The improvement in adjusted EBITDA margins, particularly in mature cities and as new stores become operational.
  • Food delivery growth: The continued acceleration of food delivery growth, driven by new user additions and increased usage.
  • Competition and market share: The ability of Eternal to maintain or gain market share in the quick commerce and food delivery markets, particularly in the face of increasing competition.
  • Dark.AI progress: The development and launch of Dark.AI, and its potential impact on the company's growth and profitability.