UBS Downgrades Nykaa To 'Neutral', Sees Limited Upside After 40% YTD Rally — Check Target Price

After a stellar run so far in 2025, global financial services firm UBS has downgraded beauty and fashion platform Nykaa-parent FSN E-Commerce Ventures Ltd. to 'neutral', citing limited upside at current valuations. The stock has gained over 40% year-to-date, significantly outperforming broader indices like the MSCI India Index and the Nifty FMCG Index.

UBS believes the stock is now fairly valued, given the strong rally and modest tweaks in estimates. It has assigned a 12-month price target of Rs 260.

While growth in Nykaa's beauty and personal care segment remains strong, UBS noted that the performance has come in slightly below expectations, largely due to elevated marketing spending.

Despite that, management continues to focus on cutting cash burn in the apparel segment, which has been a drag on overall profitability.

UBS has cut BPC Ebitda estimates by 5-6% for FY26 to FY28, while leaving estimates for the apparel segment unchanged, given its relatively stable outlook. Overall, consolidated Ebitda forecasts are down 3-6% for FY29-30.

With the stock currently trading at a FY26 EV/Ebitda of 61 times and 41 times for FY28, UBS believes valuations are now fair and fully priced in.

The retailer, in a business update to the bourses recently, noted an accelerated growth momentum in the second quarter of fiscal 2026, with the consolidated gross-merchandise-value growth expected to be close to thirties, compared to mid-twenties in the last few quarters.

This superior performance is driven by renewed growth in the fashion vertical and healthy performance of beauty vertical. Nykaa’s beauty vertical is expected to deliver net-sales-value and net-revenue growth of mid-twenties, marking over 10 consecutive quarters of sustained growth momentum, according to an exchange filing.

Nykaa’s fashion vertical is expected to deliver an NSV growth of higher mid-twenties on the back of strong traction in core platform business, which was led by expanding brand assortment and robust customer acquisition.