A strong growth in high-income and upper middle class households will drive Nykaa's beauty and personal care, and fashion segments ahead of the industry, according to brokerages.
Nykaa targets upper-mid and high-income customers with $10,000 annual income, who are brand conscious with high category awareness, Jefferies said in a June 18 note. "Rising e-commerce penetration, higher income levels and demographic shifts should drive a strong growth in online BPC and fashion," the brokerage said.
Citing management, Nomura Holdings Inc. said the beauty and personal care industry in India is expected to record 29% CAGR, while the Indian fashion industry may clock a 27% CAGR over 2022-2023. "Nykaa plans to grow ahead of the market," it said.
Shares of Nykaa's parent company, FSN E-Commerce Ventures Ltd., rose 3.95% to Rs 150.05 apiece, compared to a 0.30% decline in the benchmark Nifty 50 as of 10:14 a.m.
The stock rose as much as 2.39% intraday. Total traded quantity so far in the day stood at 2.8 times the 30-day average.
Of the 22 analysts tracking the stock, 16 maintained 'buy', two suggested 'hold', while four analysts recommended 'sell'. The consensus price target implies a potential upside of 23.4% over the next 12 months.
Here's what the brokerages have to say on Nykaa:
Nomura
Maintains 'buy' with target price of Rs 183, implying a potential upside of 27%.
Expects steady margin expansion to continue over the next few years.
Predicts a strong 25% CAGR for Nykaa's beauty and personal care segment over FY23-FY30.
Sees overall revenue CAGR of 25% over FY23-FY30 and Ebitda margin to expand 12.7% by FY30.
Says premium segment is growing at 2.5 times the mass segments, which is favorable for Nykaa.
BPC is expected to deliver strong and profitable growth as scale efficiencies come through.
Jefferies
Maintains 'buy' rating with target price Rs 200 apiece, implying a potential upside of 39%.
Premiumisation trend plays well in favour of Nykaa, given the platform positioning.
Outlook on profitability is positive, led by better customer retention and own labels.
A strong tech backbone is core to Nykaa's success and the investments continue to augment tech capabilities.
Rising e-commerce penetration, higher income levels and demographic shifts should drive a strong growth in online BPC and fashion.
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