Nykaa Q1 Review: Brokerages See Break-Even In Sight; Citi Raises Price Target
Jefferies and Citi Research have hiked target price for FSN E-Commerce Ventures while most maintained target prices.
Nykaa's parent, FSN E-Commerce Ventures Ltd., is aiming to break even in the current financial year. Brokerages maintained stock rating and target price with the exception of Jefferies and Citi Research. These two brokerages hiked target prices.
In the first quarter earnings, some key positives were continued momentum in FSN E-Commerce's beauty and personal care segment andlower losses in fashion segments, Citi Research said. Fashion revenue growth was ahead of the broking's estimates. It has lowered loss estimates for the fashion segments.
Nykaa delivered a 6.5% Ebitda margin which is below Citi Research's estimate of 6.8%, the brokerage said in a note on Tuesday. It has raised Ebitda estimates by 6% and 9%, respectively, for financial years 2027 and 2028, the brokerage said.
Citi Research has raised the target price to Rs 175 for Nykaa from Rs 160 apiece. The target price implied a 15% downside from Tuesday's close price.
Nykaa Q1 Highlights (Consolidated, YoY)
Revenue up 23.42% to Rs 2,154.94 crore versus Rs 1,746.00 crore.
Net Profit up 142% to Rs 23.32 crore versus Rs 9.64 crore.
Ebitda up 46.52% to Rs 140.68 crore versus Rs 96.01 crore.
Margin up 102 bps at 6.52% versus 5.49%.
Jefferies found it impressive that FSN E-Commerce Ventures has delivered a 26% growth in beauty business along with margin expansion amid declining urban consumption and a rise in quick commerce. The brokerage has maintained a rating of Buy and raised the target price to 250 apiece, which implied a 22% upside from Tuesday's close price.
Nykaa has beaten Jefferies' Ebitda estimates. Its revenue advanced on strong brand performance because of high marketing. Hence, margin expansion was lower due to high marketing costs, Jefferies said.
Beauty and fashion segments continued to deliver industry-leading growth, which is helping FSN E-Commerce Ventures to gain market share, Morgan Stanley said. The brokerage said that Nykaa's margin was in line and its beauty growth is on track.
Despite demand remaining subdued, Nykaa is set to grow faster than market growth in both the beauty and fashion segments. Morgan Stanley has maintained an overweight rating with a target price of Rs 225, which implied a 9% upside from Tuesday's close.
Macquarie is seeing risk to the margin of the beauty segment as FSN E-Commerce Ventures is trying to be competitive with the quick commerce through its 'Nykaa Now' initiative. The brokerage maintained an 'Underperform' rating with a target price of Rs 204.95 apiece, which implied a 0.4% downside from Tuesday's close.
