Equirus Securities initiated its coverage of FSN E-Commerce Ventures Ltd., which operates beauty and personal care retailer Nykaa, with a 'long' rating on the back of its strong positioning in the market.
The brokerage has set a target price of Rs 240 apiece, implying a potential upside of 37% from the previous close. It expects sales to grow at a compound annual growth rate of 26% over financial year 2024–29.
"What sets Nykaa apart is its profitability, a rare achievement in the e-commerce industry," it said a note dated June 26. "Focus on unit economics and profitability, driven by careful cash-burn management and an asset-light balance sheet, has resulted in higher promoter shareholding (currently 52%) vis-a-vis other consumer internet plays."
With about 38% of the online BPC market and an even larger proportion in the beauty sector alone, Nykaa has grown to become one of the biggest online beauty retailers in India. With 187 stores in 68 cities, Nykaa has effectively transitioned from being an online-only merchant to an offline player, Equirus said.
Equirus Securities sees a strong growth trajectory over the next decade with a $31 billion opportunity by 2027. Its confidence is backed by the insights from the global beauty markets, India's total addressable market in the beauty sector and Nykaa's strong positioning.
The beauty brand has attractive valuations in store and its stock trading is at 58 times the fiscal 2028 price to earnings. The return on equity and return on invested capital is estimated to reach 37– 38% by fiscal 2028, according to Equirus.
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