PremiumFSN E-Commerce Ventures aka Nykaa will be in focus during this week's trading session as the stock will turn ex-bonus on November 10 ahead of the record date. Last week, Nykaa received the board of directors' approval for issuing bonus shares in the ratio of 5:1. The company announced its Q2FY23 earnings, under which, it recorded strong growth in profitability and top-line front. JM Financial has suggested buying in Nykaa shares with a target price of ₹1,680 apiece. Currently, Nykaa shares are around ₹1,100 levels on Dalal Street.
Last week, the lifestyle retailer received shareholders' approval for issuing bonus shares in the proportion of 5 fully paid-up equity shares for every 1 equity share having a face value of Re 1 each to its shareholders.
In its regulatory filing on November 3, Nykaa said, the company received an overwhelming response from its shareholders and witnessed 100% of the voting in favour of the Bonus Resolution.
Nykaa believes that the bonus shares encourage the participation of retail investors in the long term, as well as see a wider shareholding. Additionally, the company aims to attract and retain the right talent pool and build long term incentive structures.
The record date to determine eligible shareholders for the bonus issue is fixed on November 11. That being said, the stock will turn ex-bonus on November 10.
On BSE, Nykaa shares closed at ₹1,104.70 apiece on Friday down by 2.05%. The company's market cap is over ₹52,441 crore.
During Q2FY23, Nykaa registered a consolidated net profit of ₹5.2 crore --- rising by 330% as compared to ₹1 crore in the year-ago quarter. Revenue from operations jumped by 39% to ₹1,230 crore from ₹885 crore in the corresponding quarter of the previous fiscal.
In Q2FY23, Nykaa said, it continued to demonstrate strong GMV growth with improvement in gross margin, efficiency in fulfillment and marketing cost lead to improvement in EBITDA margin year-on-year (YoY).
As of September 30, 2022, the company increased its own physical store count to 124 stores, including two new Fashion stores, with a total area of 1.2 Lacs sq. ft. across 53 cities
Analysts at JM Financial in a report said, "Nykaa reported Q2FY23 numbers that demonstrated increased strength for the dominant positioning in BPC vertical while the newcomer, Fashion vertical, is struggling to gain market share. QoQ GMV growth of 9% was driven by 8%/3%/37% GMV increase in
BPC/Fashion/Others with only BPC vertical showcasing a sequential improvement in contribution margin. Consolidated GMV for Q2FY23 reached ₹23.5 billion with ₹12 billion in NSV and ₹12.3 billion in revenue. Further, the company also reported 92/96 bps improvement in gross/EBITDA margin to reach 45.3%/5.0%, driven by BPC gross margin improvement by 173bps."
Further, analysts note said, the company's related capex investments in warehousing and store expansion are resulting in higher depreciation expense, causing PAT to remain same as last quarter at ₹57 million, despite revenue and EBITDA margin improvement. The omni-channel expansion continued with 123 (2 for Fashion) stores in 53 cities along with 31 fulfilment centres in 14 cities taking Nykaa closer to its customers.
Going forward, the analysts note said, "We have tweaked estimates with revenue declining by ~11% while EBITDA margins marginally improved by 10-100bps over FY23-27E. We significantly lower our forecasts in Fashion to factor in the flat performance in unique visitors and just 0.1mn incremental transacting users."
They said that the company’s international foray with product listing on 4 portals in GCC countries and 2 portals in the USA looks exciting and further penetration could provide incremental value.
"We continue to see Nykaa dominating its focus BPC vertical and expect significant value coming from BPC in an implied SoTP valuation. Hence, our Sep’23 TP stands at ₹1,680 revised marginally," the analysts note added.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.