During trading on Tuesday, shares of FSN E-Commerce Ventures (Nykaa) dropped by 5 percent, reaching a new record low despite the high amount of transactions. On the BSE, the share price dropped to a low of Rs 133.50, representing a decrease of 4.81 percent. On the BSE, a total of 7.38 Nykaa shares have been traded so far, which compares to an average of 4.25 lakh shares traded every two weeks. There were orders to sell 2,74,561 Nykaa shares on the BSE at 10.20 am, while there were purchase orders for 1,72,090 shares on the market.
According to HSBC’s most recent report on India Equity Strategy, the stock of Nykaa has lately seen a correction, in part because of the recent global tech sell-off on increasing rates, and more recently because of the upcoming lock-in expiry on November 10, 2022. It feels that current prices are “now even more appealing and under-appreciate the structural growth opportunity in beauty and personal care.”
“In our opinion, Nykaa (the brand name for FSN), with its leading scale, reach, and extensive product selection, is a unique mix of profitable exponential growth and sustainable expansion. Over the next ten years, we anticipate that the revenue will double every two to three years on average,” it stated.
The forecasts for Nykaa’s quarterly revenue have lately been published by a few different brokerages. Kotak Institutional Equities anticipates that Nykaa would record a gain in sales of 39 percent year over year. This is mostly due to the festive season, flagship sales, and ongoing development in BPC (35 percent year over year) and fashion business (27 percent year over year).
We factor in successively greater ad spending because of the holiday season and increased brand-building effort. Despite this, it is expected that improvements in GM and operating leverage would result in an increase in EBITDA margin of 230 basis points quarter over quarter.
According to JM Financial, the rise for Nykaa in the December quarter would be led by the festive demand over the holiday season, as well as the penetration in new channels and newer initiatives (eB2B superstore). Despite the fact that the macro environment has become more challenging, it is anticipated that Nykaa BPC will still be successful as a result of the relative inelasticity of Nykaa customers. Nykaa Fashion, on the other hand, may not continue to experience increases in market share as a result of the increased competition intensity, but the company may still achieve respectable growth on a relatively low base.
We predict that Nykaa will post a year-over-year rise in GMV of 29% and a year-over-year gain in revenue of 26%, powered by robust growth in fashion and new initiatives. “We expect overall Ebitda margin to improve by 152 basis points sequentially and 21 basis points year over year,” JM Financial stated. This is due to the fact that the BPC business is producing significant operating leverage and the firm as a whole is cutting fulfilling costs from regional centers.
JM Financial stated that the business is continuing to increase its omnichannel footprint as well as its focus on new projects such as eB2B, which the company believes will create substantial potential over the next three to five years.
