Nykaa’s stock price might rise by 27% if the company receives another ‘buy’ recommendation; but, there are some dangers to consider.
Nykaa shares are predicted to rise 27% to Rs 2,480 per share from their present levels. JM Financial Services, a research and brokerage business, has commenced coverage on FSN E-Commerce Ventures, which operates Nykaa, with a ‘buy’ recommendation. Nykaa is expected to maintain its market leadership in Beauty and Personal Care (BPC) with a strong ramp-up in Fashion, according to the company. Nykaa’s stock has dropped approximately 2% since its first public offering. While it has dropped by 27% so far this month. Nykaa’s outstanding consumer engagement metrics in BPC/Fashion and over 13 million social media followers, according to the research and brokerage business, establish Nykaa as the partner of choice for these firms’ advertising requirements.
Nykaa’s target price is vulnerable to a number of threats.
JM Financial, on the other hand, stated that failure of the fashion sector to ramp up, margin erosion owing to expansion at the expense of premiumisation and lower spends per user, and a fast spike in competition intensity are the significant downside risks to its target price of Rs 2,480 apiece.
It stated that the company’s omnichannel development is critical. “Nykaa should continue to aggressively expand its retail store network as it assists the company in organic customer acquisition, providing touch and feel experience to online buyers, and tapping into consumers’ wallet share that was spent in-person during travel/outings,” according to the brokerage firm. It also stated that advertising income may create 4.2-4.6 percent of GMV, which will be a strong margin expansion driver.
Nykaa has become a trusted platform for both customers and businesses thanks to its focus on content, curation, and convenience, according to the company. “As of August 31, FY21, Nykaa offered 3.1 million stock keeping units (SKUs) from 4,078 brands to a total transacting consumer base of 13.1 million, becoming Nykaa India’s largest speciality retail platform,” JM Financial Services analysts said.
Nykaa operates in the e-commerce category, where behemoths like Amazon (India) and Flipkart have struggled to break even despite decades of operation and the ability to amortise fixed costs across numerous categories, according to the research and trading business. This is due to their incapacity to build consumer loyalty and their reliance on discounts. “By comparison, Nykaa management had the strategic vision to address important consumer pain points and retain users on the platform even when they weren’t purchasing and were simply reading or viewing content.” “With a 40% market share, Nykaa has been the key driver of expanding online penetration in the BPC vertical in India,” it stated.
UBS: Nykaa is a buy with a target price of Rs 2,750.
UBS Securities India launched coverage on Nykaa last month, with a 12-month target price of Rs 2,750 per share, representing a 40% upside from current levels. Nykaa is one of the few platforms with a healthy EBITDA margin (6.6 percent in FY21). Due to growth in private labels, scale up of the fashion category, influencer-led growth, and operating leverage benefits, UBS Securities anticipates this to reach 15.9% by FY26E.
financialexpress.com is the source for this information.
Morgan Stanley begins to cover Nykaa with an equivalent weight rating.
Morgan Stanley is optimistic on Nykaa’s company, believing the risk-reward ratio is reasonable. Nykaa has a target price of Rs 2,183, according to the brokerage.
Nykaa is a lucrative emerging e-commerce firm, according to Morgan Stanley, and fashion might follow the same path as beauty, gaining profitability sooner than the market thinks.
The brokerage stated that global beauty learnings, India’s beauty total addressable market (TAM) and AAA cohort, as well as FSN’s strong position, gave it confidence in the company’s ability to maintain an accelerated growth trajectory throughout the valuation horizon.
Nykaa will be the fastest growing firm in its India consumer coverage universe, according to the company, with a revenue CAGR of 40% from F21 to F27. This will be aided by Ebitda margin increase of more than 700 basis points to 14% from F21 to F27 as the business scales.
“In FY27, we apply a 5.6 times EV/Sales multiple to our steady to high growth consumer discretionary companies, around a 30% discount, and discount back at 13.2 percent COE to reach at our Rs 2,183 price objective, signalling limited upside from present levels,” it added.
economictimes.com is the source for this information.
Nykaa’s stock is down 6% in the midst of a market sell-off! What are the options for investors?
On the Bombay Stock Exchange (BSE), Nykaa (listed as FSN E-Commerce Ventures Limited) shares fell 6% to an intraday low of Rs 2,283.55 on Friday.
The stock closed at Rs 2,321.85, down 4.73 percent from its previous closing of Rs 2,437.15. The company’s market capitalization has dropped to Rs 1,09,806.61 crore.
With a ‘Buy’ rating and a target price of Rs 2,900 per share, HSBC commenced coverage on the stock.
“In the future decade, we estimate revenue to double every two to three years, which we believe will be the primary driver for the stock. For the next two to three years, marketing expenditures are projected to stay high, putting pressure on profits “It was stated.
Nykaa is still in an exponential development period, according to the report, and will be for a long time. The business has a unique mix of profitability and long-term, exponential development.
Dolat Capital, on the other hand, has commenced covering with a ‘Sell’ rating and a target price of Rs 1,600 per share.
“Nykaa’s unusual combination of growth and profitability – a rarity in the online arena – highlights the company’s capabilities. We expect it to trade at a scarcity premium due to its excellent business position. But, no matter how much we stretch the timetable, present values of 19.4/13.7x FY23/24E EV/Sales look too high for our comfort “It was said.
Nykaa’s entry into the fashion segment holds promise, according to brokerage firm Prabhudas Lilladher, with a focus on premium customers, a curated and managed marketplace offering over 1.8 million stock keeping units (SKUs), private labels like NYKD and Pippa Bella, 20 dresses, and an industry-leading average order value (AOV) of Rs 3977 and 25% contribution to gross merchandise value (GMV) in 5MFY22.
“Although we estimate lower margins in FY22 (due to lower ad spend in FY21), we expect sustained margin improvement driven by scale efficiencies,” it continued. “It has already improved margins from 1.8 to 6.6 percent during FY19-21, making it one of the few e-commerce businesses to turn profitable.”
FSN E-Commerce Ventures Ltd, which owns the online beauty e-commerce platform Nykaa, reported a 95% year-on-year (YoY) fall in consolidated net profit for the July-September quarter, at Rs 1.2 crore, as costs increased. In the previous financial year, it made a profit of Rs 27 crore.
The company’s income from operations increased by 47% year on year (YoY) to Rs 885.3 crore from Rs 603.8 crore in the previous quarter.
Nykaa’s shares debuted at a premium of 79% to the issue price, indicating a great debut for the online cosmetics company. The BSE listed the subsidiary of FSN E-Commerce Ventures Ltd for Rs 2,001 per share, up from the IPO issue price of Rs 1,125.
businesstoday.in is the source for this information.
Nykaa Share Price Target: Should You Hold Or Sell After Nykaa’s Successful IPO?
FSN E-Commerce Ventures, Nykaa’s parent business, had a strong start to the stock market today. Its stock was offered on the NSE at Rs 2,018, up 78% from its initial public offering price of Rs 1,125. Similarly, it began trading on the BSE at Rs 2,001, a premium of 77%. Nykaa’s listing was pushed back a day, to Wednesday. The business was originally set to go public on Thursday.
Investors should not consider making new investments in the firm at this time, according to Aastha Jain, Senior Research Analyst at Hem Securities. “Investors should take partial profit booking in the firm after this good listing.” It is possible to book 50-75 percent of the investment and hold the rest for a longer length of time.”
From October 28 to November 1, 2021, Nykaa’s initial public offering (IPO) was open for subscription. The initial equity sale garnered Rs 5,352 crore for the firm.
According to Santosh Meena, Head of Research at Swastika Investmart, the rising momentum would last at least a few days before normalising, since valuations may be a worry following high listing gains.
He went on to say that investors should retain this company for the long term since it is one of the few new age equities in their portfolio. “It’s difficult to acquire after a period of significant profits. New investors, on the other hand, can make partial deposits.
According to NSE statistics, the famous e-commerce platform in India got bids for 216.59 crore shares out of a total issue size of over 2.64 crore shares. The issue was oversubscribed 82 times, with bidders’ shares for qualifying institutions being oversubscribed 91 times and non-institutional purchasers being oversubscribed 112 times. The retail bidders’ share was oversubscribed by 12.24 times.
According to Arijit Malakar, Head Research (Retail), Ashika Stock Broking, the firm has been EBITDA positive for the past three years and has built a strong brand value, as seen by the rising share price. “Nykaa’s growth profile is stronger than both foreign peers and Indian merchants, indicating that it has significant development potential,” he added.
Nykaa is India’s largest online cosmetics, personal care, and fashion marketplace. In FY 2011, the firm processed 17.1 million orders and had 80 offline outlets in 40 locations throughout India.
Nykaa’s primary strength, according to Sneha Poddar, AVP Retail Research at Motilal Oswal Financial Services, is its inventory-based business strategy, which allows it to provide approved items while assuring availability and prompt delivery.
In India, the online beauty and personal care (BPC) business is quite small (only 8%), yet it is developing at a high rate of 60% per year. “We believe Nykaa is ideally positioned to access the rapid growth digital/online penetration in the BPC/fashion sector,” he continued, citing Nykaa’s 35% market share in online BPC.
EconomicsTimes.com is the source for this information.
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