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HDFC Securities Report
FSN E-Commerce Ltd.'s FY26 customer acquisition drive, especially in beauty and personal care (priced-in), is certainly encouraging, according to HDFC Securities Institutional Equities. However, it also suspects that in the medium term, the ask from BPC growth remains high.
In 9M FY26 (brokerage's estimates), if one strips out own brands' sales and eB2B, core BPC is estimated to have grown at sub-20%. One may argue why strip out own brand sales? The reasons are two-fold:
- Only one private label (Dot & Key; annualised run-rate: Rs 1,900 crore) is estimated to account for >60% of private labels' gross merchandise value. How much can one brand scale? The odds are there might be a natural cap here;
- Reliance on other channel sales is on the rise for its own brands (BPC), which is not exactly a confidence booster for own platform health.
Note: While own brands (BPC) grew ~69% YoY in 9MFY26; own channel sales grew 47%.
On BPC margins, the brokerages also sees a lion's share of the 80 basis points BPC margin is courtesy
- higher own brands salience and
- improving eB2B margins (~500 bps in 9MFY26).
The brokerage also suspects core BPC platform margins do not offer leverage benefits, given the imperative to invest more in rapid fulfillment options. Fashion losses continue to ebb; however, from here on, most of the heavy-lifting would have to be done by cutting the customer acquisition purse; which may in turn have growth implications.
HDFC Securities maintains its FY27/28 Ebitda estimates and retains Sell rating with a target price of Rs 205/share (implying 58 times FY28 pre-IND AS EV/Ebitda).
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