Nykaa Falls 2.4% A Day After Q3 Earnings Result; Two Brokerages Cut Price Targets

Shares of beauty and fashion ecommerce major Nykaa ended Wednesday’s (February 7) trading session 2.4% lower at INR 156.6 on the BSE, reversing the 6% gain it witnessed in the early trading hours.

On Tuesday, Nykaa reported its Q3 FY24 results. Its net profit more than doubled year-on-year (YoY) to INR 17.4 Cr, while operating revenue increased 22% YoY to INR 1,788.8 Cr.

The startup witnessed a significant growth in its fashion vertical in the festive quarter, surpassing the growth in the beauty and personal care (BPC) segment.

Nykaa’s total gross merchandise value (GMV) jumped 29% year-on-year (YoY) to INR 3,619.4 Cr in Q3. While the BPC segment saw a 25% YoY growth, Nykaa Fashion’s GMV zoomed 40% YoY.

At least two brokerages cut their targets on Nykaa shares post the Q3 earnings. Jefferies slashed its price target (PT) to INR 210 from INR 230 earlier due to the company’s EBITDA miss during Q3. 

The brokerage’s PT currently implies an upside of 34% to the stock’s last close.

Jefferies also cut its FY24-25 EBITDA estimates on Nykaa by 3-8% while also lowering its contribution margin estimates for the BPC business.

On the other hand, Kotak Institutional Equities also cut its fair value on the stock to INR 165 from INR 170 earlier, implying an upside of 5.4% to its last close.

The brokerage noted that discretionary consumption in FY24 has been lacklustre for Nykaa and it expects some revival in the same in FY25.

It has an ‘add’ rating on the stock while Jefferies has a ‘buy’ rating.

However, Kotak expects Nykaa to witness a loss reduction in its eB2B (Superstore) business. 

In fact, Nykaa’s others segment, which comprises the eB2B business, saw its GMV increase 39% YoY to INR 237.3 Cr during the reported quarter.

Meanwhile, Nuvama Institutional Equities raised its PT on Nykaa to INR 189 from INR 187 earlier and reiterated its ‘buy’ call.

“Rising competition, increasing debt and visibility on margin improvement are potential reasons for missing the recent re-rating versus other platform peers. We and consensus for now build a 200bp margin improvement for FY25 that is key to watch,” noted the brokerage.

On the other hand, JM Financial noted that amid the “murmurs of rising competition” for Nykaa’s BPC vertical, the company seems to have retained its market share, if not increased it.

“Our channel checks suggest that the company continues to perform better than the rising competitors and would benefit sharply as/when demand environment improves,” said the brokerage.

JM Financial also retained its PT of INR 210 on the stock while reiterating a ‘buy’ call. The brokerage expects Nykaa to be a strong beneficiary of improving discretionary spending.

Nykaa shares are currently trading 9.9% lower year to date.

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