Nykaa share price: should you sell Nykaa shares after the Q3 show? Here’s what analysts are saying

FSN E-Commerce Ventures, which controls Nykaa, reported a 58% drop in December quarter results, but early reviews from brokerages suggest the stock could see a rise of up to 34% .

Foreign brokerage Goldman Sachs has a target of Rs 2,420 on the stock, while Morgan Stanley sees it at 2,040. JM Financial pegs its value at Rs 2,120 while Kotak Institutional Equities sees the fair value of the stock at Rs 2,100.

As of 10:45 a.m., the certificate was trading at Rs 1,806.35, down 2.4%.

The company had on Wednesday announced a 58% year-on-year drop in net profit to Rs 29.01 crore despite a 35.94% increase in revenue to Rs 1,098.36 crore. Sequentially, both numbers were better. Profits increased 24% from the September 2021 quarter and revenues increased 24%.

JM Financial said the company continued to invest in brand development, with ad spend accounting for 14% of revenue as Nykaa Fashion launched its first-ever television campaign featuring Alaya F.

“Even though fulfillment expenses increased due to Covid-related delays in warehouse rollout, the company managed to post a strong Ebitda margin of 6.3%, gradually approaching the Ebitda margin. ‘Ebitda of 6.6% for FY21. We believe a strong driver of margin improvement is rapidly improving advertising revenue with brands choosing Nykaa’s platform for high-intent buyers said the brokerage while reducing its target on the stock to Rs 2,120 from Rs 2,480 earlier.

The company’s Managing Director and CEO Falguni Nayar said, “The brand’s brick-and-mortar store network had one of its strongest quarters and the company continued to open new stores in line with our more omnichannel vision. large. Marketing continues to be an area of ​​investment for Nykaa to buy out and recruit new consumers to ensure stronger organic growth.”

Kotak Institutional Equities said it cut its fiscal 2022-24 revenue forecast by 2% as it recorded 9MFY22 performance, largely on lower beauty and personal care (BPC) revenue.

“We are assuming higher gross margins, although we are also preparing for higher store opening costs, which leads to higher depreciation / interest cost. This translates to a 2 to 3 reduction in EPS % for FY 2022-23 and a revised fair value based on DCF of Rs 2,100 from Rs 2,150 earlier),” he said.

For the quarter, revenue growth tracked GMV growth, with fashion GMV growing at a faster rate than beauty. Analysts noted that fashion had a much lower participation rate than the beauty segment.

On a segmental basis, BPC segment GMV increased 32% year-over-year, driven by a 31% increase in orders and an expected 1% decline in average order value (AOV), offset by revenue higher advertisements.

In the fashion segment, GMV jumped 137% year-over-year on the back of a doubling in year-over-year increase in orders and a 24% increase in AOV.

Goldman Sachs said Nykaa’s total gross merchandise value (GMV) growth was 49% year-on-year and the company said it was focused on balancing growth. Ebitda margin increased by 330 basis points to 6.6%. “The improvement in margin profile is positive, the brokerage said while suggesting a target of Rs 2,420 on the stock.

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