Nykaa Q3 Results Review: Dolat Capital Reiterates ‘Accumulate' On The Stock, Lowers Target Price — Here's Why

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Dolat Capital Report

FSN E-Commerce Ventures Ltd.’s Q3 FY25 operating performance was marginally ahead and healthy. Gross merchandis value/revenues/gross profit/Ebitda grew by 33/27/30/43% YoY. PAT grew by 48% YoY on a low base, but was below estimate due to higher depreciation and finance costs on store roll-out.

The company is facing challenges of balancing rapid growth and margin expansion as multiple segments viz fashion, superstore, GCCs etc. are under-investment mode thereby restricting margin expansion. Core BPC margins, too, remain rangebound limiting the platform effect. Growth in Fashion continues to remain weak. Management has given upbeat guidance on its investor day projecting robust GMV (and thus revenue) growth coupled with healthy margin improvement. Achieving its guidance would be key. We find Nykaa treading on the right path.

We change our FY25/26/27E revenue estimates by 4/5/5%, Ebitda by 2/2/1% and EPS by -16/-8/-4%.

Reiterate ‘Accumulate’ rating with target price of Rs 190 @ 4.5 times FY27E EV/S (earlier Rs 200 @ five times FY27E EV/S). We have lowered multiples to factor in weak margin and higher below Ebitda costs.

At current market price, Nykaa trades at ~63/45x FY26/27E EV/E and 174/96x PE. Valuations remain extremely rich leaving limited room to err.

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