Is the worst over for Nykaa shares? Top brokerages say time to ‘buy’ now

FSN E-Commerce Ventures Ltd, which runs online fashion retailer Nykaa, on Tuesday posted a multi-fold increase in its consolidated net profit at ₹5.19 crore for the three months ended September 2022 or Q2 FY23 as compared to ₹1.17 crore in the same period a year ago. The consolidated Gross Merchandise Value (GMV) of Nykaa grew 45%year-on-year to ₹2,345.7 crore in the September quarter.

“Nykaa Q2 was better than estimates on GMV, revenues & Ebitda led mainly by BPC which enjoyed a strong YoY growth across parameters. Fashion was modest despite a low base, highlighting profitability focus. Own labels and retail footprint got a fair share in mgmt. comments. Nykaa has made senior level appointments (CTO, B2B, Own labels). We u/g our Ebitda estimates on better margins & retain BUY – expect share price volatility ahead of lock-up expiry next week. We upgrade our FY23-26E Ebitda estimates by 24-33% on better margins,” said global brokerage Jefferies while maintaining Buy rating on Nykaa shares with a target price of ₹1,650 apiece.

FSN E-Commerce Ventures reported a mixed bag, albeit a positive performance overall – key highlights being the BPC business’ margins along with sustained growth (GMV up 39% YoY). The company’s BPC business registered 39% year-on-year growth in orders at 84 lakh during the reported quarter. A miss, in Edelweiss’ view, was muted growth in fashion (orders down 7% QoQ) and higher working capital, which could reverse.

Brokerage and research firm Edelweiss is also bullish on the stock post Q2 results. “We build in losses from the other segment, which drives an immediate EBITDA cut (23% for FY23) but is NPV neutral. Baking in higher cost of capital assumptions, gives us a revised target price of ₹1,506 per share. We maintain BUY.”

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.