 "E-commerce retailer Nykaa's stock declines the most in nine months")
Shares of FSN E-Commerce, the parent company of Nykaa, experienced their largest intra-day decline since March 2022 on Monday following concerns raised by brokerages about the company's growth prospects. The stock concluded the session at Rs 134, marking an 8.3 percent decrease, the sharpest drop since November 2022. The company had released its quarterly results on Friday after the market closed.
For the quarter ending in June, FSN E-Commerce reported a 24 percent year-on-year (Y-o-Y) increase in revenues, reaching Rs 1,422 crore. However, its net profit saw a 28 percent decline, amounting to Rs 3.3 crore.
In a note, Kotak Institutional Equities highlighted that the revenues fell short of expectations due to lower performance in the beauty and personal care (BPC) and fashion gross merchandise value (GMV) segments.
"We have revised down FY2024 earnings per share (EPS) by 29 percent as we factor in weak 1Q performance, sustained investments in the eB2B business, and adjustments to growth and margins in fashion and BPC," the brokerage communicated in a note to investors.
Kotak Institutional Equities downgraded the stock to "ADD" and revised the target price to Rs 165 from the earlier Rs 210.
Similarly, ICICI Securities also downgraded the stock to 'ADD', emphasizing that aggressively pursuing growth at elevated levels might impact gross margins, and achieving success in the fashion business could prove challenging given the intensified competition in the category.
Ambareesh Baliga, an independent equity analyst, stated, "I don't foresee a significant correction in the stock from this point. However, there is evident investor disinterest as the company grapples with enhancing its profitability."