India's Eternal rises as investors bet on Blinkit, shrug off profit drop
May 2 (Reuters) - Indian online delivery firm Eternal's (ETEA.NS), opens new tab shares rose on Friday as investors looked past a sharp drop in profit to focus on its quick commerce arm and signs of resilience amid intense competition.
Eternal, which operates food delivery platform Zomato and quick commerce Blinkit, was up 1% higher as of 1:20 p.m. IST.
The stock had declined 5.4% in pre-open trade but reversed course within the first hour of opening bell, and rose as much as 3%.
The positive sentiment followed Eternal's fourth-quarter results, where it reported a 78% profit drop driven by expenses related to Blinkit's expansion, but analysts said the numbers were "better than feared."
Jefferies analysts said there were some concerns over Eternal's results amid competition in the quick commerce space.
But they said the results were "strong," citing a contained EBITDA loss and more than double on-year growth in Blinkit's gross order value.
Revenue from Blinkit more than doubled year-on-year to 17.09 billion rupees ($203.45 million), while its store count also more than doubled to 1,301 stores.
However, increased competition compelled Eternal to accelerate store openings, offer discounts and subsidised delivery, as it fought for market share from Swiggy's (SWIG.NS), opens new tab Instamart and start-up Zepto.
Nomura said Eternal is "well positioned to weather competition," citing stable contribution margins from Blinkit, which came in at 3.9% compared to 3.8% last quarter.
The view was also echoed by Elara Securities. "Blinkit has held market leadership and its losses have been lesser than rivals Swiggy Instamart and Zepto, which seems to appeal investors," said analyst Karan Taurani.
Swiggy, whose losses widened last quarter, will report fourth-quarter results next week.
Average rating of analysts on Eternal and Swiggy remains at "buy", according to data compiled by LSEG.
($1 = 84.0010 Indian rupees)
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