Nykaa reported a strong fourth quarter led by margin expansion, robust beauty demand and a key milestone in its fashion business, prompting brokerages to raise target prices despite remaining divided on valuations. The company posted a net profit of Rs 78.4 crore for Q4, sharply higher than Rs 20.3 crore a year earlier. Revenue rose 28.4% year-on-year to Rs 2,648 crore, while EBITDA jumped 67.2% to Rs 223 crore. EBITDA margin improved to 8.4% from 6.5% last year.
Beauty remained the company's largest growth engine, with segment revenue rising 27% and beauty and personal care NSV surging 29%. Fashion revenue grew an even faster 40%, while fashion NSV rose 42%. Importantly, the fashion business turned EBITDA positive during the quarter.
Jefferies maintained its Buy rating and raised its target price to Rs 350 from Rs 315, calling the performance “Flawless Beauty.” The brokerage said fashion's breakeven suggests management may have “cracked the code” in the segment.
However, not all brokerages turned bullish. Citigroup maintained its Sell rating, while Macquarie Group retained an Underperform call despite acknowledging healthy beauty margins and strong demand trends. Both brokerages flagged slowing growth in beauty advertising income and moderation in Nykaa's own beauty brands as areas to watch, particularly in a tougher macro environment.
ALSO READ: Nykaa Exclusive: Fashion Business Set to Break Even, Says CEO Falguni Nayar
Citi on Nykaa
- Citi maintains a Sell rating on Nykaa and has raised its target price to Rs 225 from Rs 215.
- The brokerage said Q4 margins came in ahead of expectations, supported by lower fixed operating costs.
- Improvement was driven by lower losses in the fashion business, an uptick in Beauty & Personal Care gross margins and operating leverage benefits.
Macquarie on Nykaa
- Macquarie maintains an Underperform rating on Nykaa with a target price of Rs 210.
- The brokerage noted that Q4 EBITDA was 5% ahead of estimates.
- Positives included strong gross margins in the beauty segment, healthy demand trends across categories and EBITDA break-even in the fashion business.
- However, Macquarie highlighted concerns around sub-15% growth in beauty advertising income and moderating growth in Nykaa's own beauty brands.
Jefferies on Nykaa
- Jefferies maintains a Buy rating on Nykaa and has raised its target price to Rs 350 from Rs 315.
- The brokerage described the beauty business performance as “flawless”, with strong growth continuing across segments.
- Fashion growth continued to accelerate, while achieving break-even signalled that management may have successfully improved execution in the segment.
- Jefferies also highlighted continued strength in Nykaa's owned brands portfolio.
- While management sounded cautious on the macro environment, Jefferies remains positive on the company's medium-term outlook and retains its Buy rating despite elevated valuations, citing strong growth visibility.
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