 "Nykaa surges 19% on heavy volumes; stock at highest level since Oct 2022")
Shares of FSN E-Commerce Ventures, the operator of beauty and personal care (BPC) brand Nykaa, hit a two-year high of Rs 228.5, surging 18.6 per cent on the BSE during Wednesday’s intraday trade, driven by heavy volumes. The stock was trading at its highest level since October 3, 2022, and recorded its sharpest intraday rally since November 11, 2022, when it soared nearly 20 per cent.
Nykaa settled 9.4 per cent higher at Rs 210.75, compared to a 0.13 per cent gainer in the BSE Sensex. The average trading volumes at the counter jumped over tenfold, with a combined 112.19 million equity shares — representing 3.8 per cent of Nykaa’s total equity — changing hands on the National Stock Exchange and BSE. The stock had previously hit a record high of Rs 429 on November 26, 2021.
FSN E-Commerce Ventures is involved in the manufacturing, selling, and distribution of BPC, wellness, fitness, health care, skin care, and hair care products. These products are sold through various channels, including online platforms such as e-commerce and mobile commerce, as well as offline stores and stalls.
Last week, Nykaa reported a 152 per cent year-on-year (Y-o-Y) jump in net profit to Rs 13.6 crore for the quarter ended June 30, 2024, compared to Rs 5.4 crore in the same period last year. The company’s operating revenue for the quarter was Rs 1,746 crore, up 23 per cent from Rs 1,422 crore in the corresponding quarter of the previous year.
Management is confident of accelerating growth going forward, aided by the festival season. This suggests that revenue growth momentum for the consolidated BPC business (including e-business-to-business/eB2B) may sustain at around 30-32 per cent Y-o-Y in the near to medium term.
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While the recent demand environment has not been favourable, analysts at JM Financial Institutional Securities view Nykaa as the dominant player in a segment with strong secular tailwinds and expect sustained compounding returns.
Although the brokerage firm has raised profitability estimates in the omnichannel BPC and fashion segments, it has factored in higher losses in eB2B and international operations, with cumulative losses of Rs 61.5 crore projected for 2024-25 through 2027-28, before turning earnings before interest, tax, depreciation, and amortisation (Ebitda)-positive in 2028-29.
“Rolling forward to September 2025, we maintain our target price at Rs 230 and reiterate our ‘buy’ rating, expecting the company to deliver robust numbers during this year’s festive period,” analysts said in a results update.
Analysts at Elara Capital believe the consolidation of Nykaa Man and the eB2B business within Nykaa BPC will positively impact revenue growth for the BPC business by 7-8 per cent. However, at an absolute Ebitda level, this impact could be offset by lower margins (due to losses in eB2B).
“We assume a margin expansion of 220 basis points over the next two years for the consolidated BPC business, factoring in better ad revenue growth and lower losses in the eB2B business. But we largely maintain our 2025-26/2026-27 earnings estimates after factoring in increased losses in the business due to the Gulf Cooperation Council. Break-even in the fashion segment in line with the guidance, coupled with better growth offtake in BPC amidst the threat of quick-commerce players, will drive share price performance,” the brokerage firm said in a results update.
However, the stock is currently trading above the brokerage firm’s target price of Rs 210 per share.