Nykaa shares plunge 7%, down for 5th day. A pullback rally likely near Rs 110, say analysts
Shares of FSN E-Commerce Ventures (Nykaa) fell 4 per cent in Wednesday’s trade, taking their decline to fifth straight session. The scrip has been reeling under pressure, with the month of January seeing only three sessions when the stock ended higher for the day. Analysts see more pain on the counter, before the stock stages some recovery.┬а
Nagaraj Shetti of HDFC Securities said the stock has seen a sharp fall from Rs 150-odd levels. He said the stock has support at Rs 110 level. This is the level, Shetti said, could see some pullback and an 8-10 per cent rise is possible. That said, it’s a ‘sell on rise’ stock, Shetti warned.┬а
Milan Vaishnav, founder of Gemstone Equity Research said the stock is in oversold zone, but there are no signs of bottoming out for now. He noted that the stock has seen exponential jump in volumes in three of last five trading sessions.┬аVaishnav said when one sees such high volumes along with a steep price fall, generally a stock forms a bottom. But for Nykaa, he said there is no signs of accumulation around current level, he said.┬а
The scrip is trading below all its moving averages. ┬аIts 5-day EMA stood at Rs 137 level. On Wednesday, it declined 7.46 per cent to hit a new low of Rs 123.30 no BSE.
The recent correction in Nykaa stock was 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, analysts noted. HSBC in a India equity strategy note said Nykaa valuations were even more appealing and under-appreciate the structural growth opportunity in beauty and personal care. It noted that Nykaa with its leading scale, reach, and broad product range is a rare combination of profitability and sustainable exponential growth, as it pegged its revenue to double every two to three years over the coming decade.
Nykaa may report a revenue growth of 39 per cent YoY in the December quarter, Kotak Institutional Equities said in a preview note. The growth would be led by flagship sale, festive season and continued growth in BPC (35 per cent YoY) and fashion business (27 per cent YoY), the brokerage said in a note.
JM Financial also felt that 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, JM Financial 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.
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