Nykaa posted 2 per cent higher-than-expected revenue growth of 34 per cent YoY, aided by 29 per cent YoY growth in BPC GMV and 38 per cent YoY growth in fashion GMV, said Kotak Institutional Equities. FSN E-Commerce Ventures Ltd (Nykaa) clocked a decent set of March quarter results, post which a few brokerages suggested price targets of up to Rs 210 on the stock. But there remained analysts who see no upside on the counter ahead amid weakening growth.
Kotak Institutional Equities and JM Financial find fair value for the stock at Rs 210. Morgan Stanley values the stock at Rs 188. Nuvama Institutional Equities has set a target of Rs 186 each for the stock. Goldman Sachs and BofA Securities have a price target of Rs 175 each on the stock. Meanwhile, JPMorgan set a target of Rs 125 and HDFC Institutional Equities Rs 120, suggesting potential downside ahead for the stock.
Nuvama Institutional Equities said Nykaa's reported in-line Q4 Ebitda with moderation in fulfilment and marketing costs being the highlight. It said gross margin uptick abates concerns stemming from Q3 results. Gross merchandise value (GMV) growth was stable but moderated vis-à-vis earlier quarters while order growth in fashion stood at 8 per cent YoY only. the brokerage said.
"The focus on a mix of profitability and stable growth over superlative growth is evident. Even so, Nykaa turning net-debt, while an upshot of growth and warehousing, is not ideal," it said.
For Kotak Institutional Equities, Nykaa posted 2 per cent higher-than-expected revenue growth of 34 per cent YoY, aided by 29 per cent YoY growth in BPC GMV and 38 per cent YoY growth in fashion GMV. Kotak said the BPC business was on a strong footing, with a contribution margin of 25.7 per cent, a healthy 500 bps yoy margin expansion, driven by operating leverage.
"Fashion and B2B businesses remained loss making and were funded by BPC cash flows; we expect this to be the case in FY2024 as well. FY2023 witnessed higher fixed costs on account of higher employee costs and lease rentals; these heads should witness a breather in FY2024. We increase the estimated loss from the fashion business, though this is largely offset by the higher profitability of the BPC business. We modestly tweak estimates and retain BUY with a revised FV of Rs210 (Rs215 earlier)," it said.
HDFC Institutional Equities said Nykaa's profitability missed its expectations and said BPC segment's annual unique transacting customers (AUTC) continued to moderate, and that ad income as percentage of revenue dropped 100 bps YoY.
Ex-ad income, said HDFC Institutional Equities, the lack of non-linear monetisation levers forces the brokerage to align valuation compass somewhere between a linear business and a pure platform. The brokerage has marginally cut its FY24/25 Ebitda estimates by 1-2 per cent and maintained its 'reduce' rating on the stock.