Shares of FSN E-Commerce Ventures (Nykaa) fell 5 per cent in Tuesday’s trade to hit a fresh record low amid heavy volumes. The scrip hit a low of Rs 133.50 on BSE, down 4.81 per cent. A total of 7.38 Nykaa shares changed hands on BSE so far against a two-week average of 4.25 lakh shares. At 10.20 am, there were sell orders of 2,74,561 Nykaa shares on BSE against buy orders of 1,72,090 shares on the exchange.
HSBC in a January 16 note suggested that Nykaa stock has recently corrected partly due to the global tech sell-off on rising yields and more recently due to the recent lock-in expiry on November 10, 2022. It believes valuations are “now even more appealing and under-appreciate the structural growth opportunity in beauty and personal care.”
“Nykaa (the brand name for FSN) with its leading scale, reach, and broad product range is a rare combination of profitability and sustainable exponential growth, in our view. We expect revenue to double every two to three years over the coming decade,” it said.
A couple of brokerages recently came out with their quarterly estimates for Nykaa. ┬аKotak Institutional Equities expects Nykaa to report a revenue growth of 39 per cent YoY, primarily on account of the festive season, flagship sale and continued growth in BPC (35 per cent YoY) and fashion business (27 per cent YOY).
“We bake in sequentially higher ad-spends on account of the festive season and higher brand building activity. Despite that, improving GM and operating leverage should lead to an EBITDA margin improvement of 230 bps QoQ,” it said.
JM Financial said the December quarter growth for Nykaa will be led by the festive demand during holiday season, penetration in new channels and newer initiatives (eB2B superstore). While there has been a tougher macro environment, it expects Nykaa BPC to still do well due to the relative inelasticity of Nykaa shoppers. Nykaa Fashion, however, might still not see market share gains due to heightened competitive intensity but can still deliver decent growth on the small base.
“We anticipate Nykaa to deliver 29 per cent YoY growth in GMV ┬аand 26 per cent YoY growth in revenue led by strong growth in fashion and new initiatives. With BPC business delivering strong operating leverage and company-wide lowering of fulfilment costs from regional centres, we expect overall Ebitda margin to improve 152 bps sequentially and 21 bps YoY,” JM Financial said.
JM Financial said the company continues to expand omni-channel presence and its focus on new initiatives such as eB2B, which it believes will provide a significant opportunity over the next 3-5 years.
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