We have initiated coverage both on Zomato and Paytm; looking at a 30% upside: Hemang Jani

Hemang Jani, Equity Strategist & Senior Group VP, MOFSL, says for a market like India, for many of these things, whether it is food delivery or fintech, we are at a decent stage and there is a long runway of growth. It was a matter of whether the profitability and the valuation, whatever was the gap,at some point it will balance out. For those who have a slightly high-risk appetite, the risk reward is looking quite compelling for companies like Zomato and Paytm. We too have initiated coverage both on Zomato and Paytm and we are looking at a 30% upside.


The star yesterday was Zomato. What a surge, good volumes, nothing new. Citi report talks about a target of Rs 70. What has turned for Zomato suddenly? Everybody is talking about it. Three months ago, nobody wanted to buy it. Everybody wanted to discard the stock.
When we look at some of these exotic platform or startup companies, at one point there was a lot of exuberance and then we had a massive loss of market cap and in the past couple of months, we are seeing interest coming back.

The biggest factor which has contributed to this is that after seeing such a big drop in the market cap, the operational numbers or GMVs and many other parameters that one tracks, there is definitely a sense of improvement and having reached a certain number in terms of users, etc, the sense one is getting is that at some point these companies will start reporting better profitability, which was a key overhang.

For a market like India, the fact remains that for many of these things, whether it is food delivery or fintech, we are at a decent stage and there is a long runway of growth. It was a matter of whether the profitability and the valuation, whatever was the gap, whether at some point it will balance out. We strongly feel that for those who have a slightly high-risk appetite, the risk reward is looking quite compelling for companies like Zomato and Paytm, and we too have initiated coverage both on Zomato and Paytm and we are looking at a 30% upside.

What is your take as far as the cement pack is concerned? Dalmia Bharat, the first company from the cement pack, reported numbers and it was rather disappointing because the operational costs went up, the EBITDA per tonne was a big miss versus expectations, though the volumes were okay. Do you think whatever the Street was pencilling in with respect to margin improvement will get derated now?
In the case of cement companies, this quarter may be a little subdued or okayish but even the way things have panned out, both in terms of the overall visibility because of the kind of pickup that we are seeing from the government side, real estate and the fact that the raw material prices have cooled off, one would see incrementally positive data points in terms of earnings.

The price hike is something that people would really want to focus upon now. Even a small price hike, there is going to be a lot of positive traction across cement packs. We have been liking UltraTech, JK Cement, and some of the south-based companies like Ramco. We should have a positive bias from a medium-term perspective for cement companies.