Eternal Ltd

Eternal Ltd is an Indian food delivery business that has also rapidly grown a quick commerce business. The quick commerce arm has expanded from selling merely grocery items to many other SKUs, which increase basket sizes and improve unit economics. The food delivery business operates in a duopoly with Swiggy, with both being profitable and rational while growing at a mid-teens rate. This growth is expected to continue for many years due to the immaturity of the Indian economy and the formal food delivery sector. The quick commerce business is close to breakeven but is growing the top line at over 100% as they rapidly expand the dark store base, which is supported by India still having approximately 90% informal retail penetration. The quick commerce players offer both a highly convenient service, which is priced attractively, and thus, we think there are decades of growth ahead for these businesses. Current earnings are depressed due to quick commerce investments, so the near-term multiple is not very relevant. Thus, we focus on the fair value upside, which represents 30% at the time of writing. In the context of a generally expensive Indian market, it is a rare occurrence to have this level of upside.

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