Nykaa Share Price: FSN E-Commerce Ventures (Nykaa) zoomed 4.4 per cent to Rs 150.8 apiece on the BSE in Monday’s intra-day trade as most brokerages reiterated their ‘buy’ calls on the stock post the company’s 2023 Investor Day.
Anaylsts see the new-age stock rallying up to 46 per cent as the e-tailer is walking the fine line between growth versus profitability. While investments are likely to continue in its businesses, the company is expected to keep a tight check on variable costs.
The company used the event to elaborate on the ‘realistic’ total addressable market (TAM) and consumer base potential for Nykaa, rationale for investments in technology, deep-dive on owned brands and strategic decision-making in beauty and personal care (BPC), Fashion and Others segments. The management though resisted from providing any forward guidance.
What Do Analysts Predict About the New-Age Stock?
According to analysts, the stock could see a re-rating as growth in the beauty and personal care (BPC) segment remains stable. Comfort on competition and cash flow generation, however, will remain key monitorable.
Kotak Institutional Equities (KIE) has retained a ‘Buy’ on FSN E-Commerce shares, with a price target of Rs 210. It said the BPC business of FSN E-Commerce remains on a healthy growth trajectory while beauty will likely grow faster than the personal care category. The fashion business will sharpen its focus on private labels and customer stickiness will eventually drive lower marketing costs, analysts at KIE added.
Kotak in a note said the revenue from Beauty & Personal Care (BPC) segment continues to grow and accounts for 70 per cent of the total amount. Out of this, 40 per cent was contributed from existing customers as of March 2022, the brokerage note said.
Jefferies said: “We build-in strong order of 25 per cent+ for Nykaa BPC over FY22-26E, led by new customer additions. Order frequency is expected to see gradual growth as customer cohorts mature. BPC (Beauty & Personal Care) Gross Merchandising Value (GMV) is expected to grow strongly, at 25 per cent CAGR over FY22-26E. Fashion is expected to continue ramping up on the low base. We build in 30% GMV CAGR for Fashion. We value Nykaa’s BPC at 8X FY25E sales and Fashion at 2.5X FY25E sales to arrive at a PT of Rs 200.”
Nomura maintains a ‘Buy’ rating with a DCF-based target price of Rs 183, implying 27 per cent upside. Our DCF (Discounted Cash Flow) valuation factors in 18 per cent revenue CAGR over FY25-40F, with EBITDA margin stabilising at 16 per cent (vs 17.5 per cent). The stock currently trades at 5.1X FY25F EV/Sales, which we believe is attractive given the strong growth outlook.
Macquarie has suggested a target of Rs 115, as it saw no tangible medium term growth targets. It cited concerns over capital-intensive growth amid rising competition. Jefferies, on the other hand, suggested a target of Rs 200 on the stock. Nomura India finds the stock worth Rs 183 while the most optimistic price target was that of JM Financial and Elara Securities at Rs 210 each.
So far in this calendar year 2023, shares of the new-age company had declined nearly 7 per cent at the bourses, as against 4.2 per cent rally in the benchmark 30-pack index. The shares are still 87.2 per cent lower than its issue.
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