July 22 (Reuters) - India's Eternal expects its grocery delivery unit Blinkit's profitability to hit the higher end of its previous forecast range, the company said on Wednesday, as it expands and improves efficiency in the country's highly competitive quick-commerce sector.
Blinkit's rapid growth and profitability have become a key focus area for investors even as food delivery, via Zomato, remains Eternal's largest profit contributor.
The grocery delivery unit's adjusted EBITDA margin doubled to 0.6% of net order value during the June quarter from the previous quarter, while adjusted EBITDA rose to 1.02 billion rupees.
The margin improvement marked "the inflexion investors have been waiting for," said Vaqarjaved Khan, senior fundamental analyst at Angel One, adding it lent support to management's long-held focus on customer density and order frequency.
Blinkit's net order value rose 86% year-on-year during the quarter and the business added 200 net new stores, taking the network to 2,443.
Eternal said it expected Blinkit's long-term adjusted EBITDA margin to be at the higher end of its previously guided 5%-6% range, citing larger stores and investments that were improving operating efficiency, without providing a timeline for this target.
Most of Blinkit’s growth came from customers placing orders more frequently rather than spending more per order, Chief Financial Officer Akshant Goyal said in a post-earnings call.
The company posted a consolidated net profit of 920 million rupees ($9.53 million) for the quarter ended June 30, below analysts' estimate of 2.58 billion rupees, according to LSEG data. Net profit was 250 million rupees a year earlier.
'PREDICTABLE' HIGH COMPETITION
Eternal said competition remained high but had become more predictable, arguing that sustained discount-led growth required continued cash burn and was difficult to maintain over the long term.
The company said it remained focused on expanding assortment, geographic reach and supply-chain infrastructure instead of competing primarily on price.
For the quarter ended June 30, Eternal's revenue rose more than 2.5 times to 202.11 billion rupees, missing analysts' estimate of 204.39 billion rupees, according to LSEG data.
Reporting by Surbhi Misra in Bengaluru; Editing by Nivedita Bhattacharjee and Harikrishnan Nair
Source: Reuters