Nykaa Shares Rally 3% As Brokerages Retain Bullishness After Q3 Results

Nykaa Allots 90.5K Shares Under ESOP Scheme

SUMMARY

JM Financial retained its ‘BUY’ call on the stock with a target price (TP) of INR 240, citing the company’s ability to deliver robust growth in a tepid demand environment

Although Shein may intensify competition in the western-wear segment, on a broader level, Nykaa has a competitive advantage in the category, said the brokerage

Brokerage firm Bernstein maintained its ‘market-perform’ rating on the stock with a TP of INR 160, which implies a potential downside of 6% from the previous close

Shares of Nykaa jumped over 3% to reach an intraday peak of INR 175 apiece on the BSE today (February 11) after brokerages cheered the omnichannel beauty retailer following its strong Q3 performance.

JM Financial retained its ‘BUY’ call on the stock with a target price (TP) of INR 240, citing the company’s ability to deliver robust growth in a tepid demand environment. This implies that the brokerage sees an upside potential of 42% from the stock’s previous close.

The Falguni Nayar-led company reported a 51% year-on-year jump in its consolidated net profit at INR 26.4 Cr in the December quarter of the fiscal year 2024-25 as compared to INR 17.5 Cr in the year-ago quarter. Sequentially, Nykaa’s profit zoomed 104% from INR 12.97 Cr.

Revenue from operations surged 26.74% to INR 2267.21 Cr in Q3 FY25 from INR 1788.80 Cr in the corresponding quarter last year.

Nykaa’s core beauty and personal care (BPC) business delivered a 32% year-on-year growth in gross merchandise value to INR 3390 Cr, while revenue from this segment rose 27% YoY to INR 2,060 Cr.

On the other hand, Nykaa Fashion saw muted GMV growth of 8% YoY, while the segment’s revenue rose 21%.

“Despite unfavourable demand environment recently, Nykaa has delivered against the odds to improve margins while delivering growth in mid-twenties. We lower profitability improvement in core BPC while building a sharper improvement in Fashion,” said JM Financial.

Nykaa’s e-B2B platform SuperStore clocked a 53% YoY GMV growth in Q3 FY25, growing 12X in 3 years with the company reaching 356K retailers in 1,100 cities, the brokerage noted. It expects the SuperStore business to turn contribution profitable in FY27 and EBITDA profitable in FY29.

During a post-earnings call, Nayar said that Shein’s re-entry into India will have a limited impact on its fashion business as the Indian fashion market is highly fragmented with enough room for each player, which caters to different consumer cohorts across different fashion categories.

Although Shein may intensify competition in the western-wear segment, on a broader level, Nykaa has a competitive advantage in the category, according to JM Financial.

Meanwhile, Bernstein maintained its ‘market-perform’ rating on the stock with a target price of INR 160. This implies a downside potential of nearly 6% from the stock’s last close.

The brokerage expects Nykaa’s BPC margins to be capped in the future due to higher marketing expenses and increased competition.

While the company expects margin to expand gradually due to continued investments, margin expansion in the future will be driven by profitability improvement in its fashion and B2B businesses, which will be challenging, said Bernstein.

At 3:03 PM, Nykaa shares were quoting INR 167.50 on the BSE, down 1.24% from the previous close. The stock has declined over 5% in the last five trading sessions and 13% in the last six months.