Nykaa share price jumps 5% post Q2 results; brokerages raise target price on stock

Fsn E-Commerce Ventures news: Nykaa share price surged nearly 5% on Tuesday's trade after the online beauty and fashion retailer posted 50% jump in its consolidated net profit as compared to year-ago period. The company reported a strong Q2FY24, with a notable recovery in fashion growth following a lacklustre Q1FY24, according to analysts. A small adjustment to the cost base was required to achieve it. Nykaa share price today opened at ₹151 apiece on BSE. On Monday, ahead of company's Q2 results, Nykaa shares surged 4.9%. 

Also Read: Nykaa Q2 Results Preview: Net profit likely to double YoY; revenue growth seen at 23% led by higher GMV

According to Rajesh Bhosale - Equity Technical and Derivative Analyst, Angel One, Nykaa stock prices witnessed a gap up opening post that we are not seeing any major traction, and price currently trading around the opening levels.

“Overall we are seeing strong volumes and as long the bullish gap left today holds around 148 expect the upmove to continue likely towards the 158 - 160 zone,” said Bhosale. 

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Nykaa, on November 6 reported a consolidated net profit of ₹7.8 crore in the second quarter of fiscal year 2023-24 (Q2FY24). This is 50% higher as compared to ₹5.2 crore clocked in the year-ago period. Sequentially, the net profit rose by 44% from ₹5.4 crore reported in the first quarter of the current fiscal.

The company's revenue from operations in Q2FY24 came in at ₹1,507 crore, higher by 22% from ₹1,231 crore recorded in the corresponding quarter of the previous fiscal year.

Also Read: Nykaa Q2 results: Net profit jumps 50% to ₹7.8 crore, revenue up 22%

“EBITDA margin expanded to 5.4% for the quarter, a growth of 32% YoY on the back of both direct and indirect costs efficiencies. Fulfilment cost as a % to revenue stood at 9.7% for the quarter, compared to 11.8% in Q2 FY23. Similarly, employee expense as a % to revenue stood at 9.0% for the quarter, compared to 9.9% in Q2 FY23, witnessing improvements through the last few quarters,” the company said in an exchange filing.

Going forward, let's review the analysis and estimates of the domestic brokerages.

Nuvama Institutional Equities 

According to the brokerage, beauty and personal care (BPC) could be better and fashion revived in Q2. Growth in BPC is steady, but performance is a little lacklustre as GM shrank; the brokerage attributes this to decreased ad income and more aggressive own-brand pricing. CFO is negative on inventory stocking for the upcoming festive season.

Also Read: Atul Ltd to declare buyback of shares today. Details here

“Rolling over our DCF based target price to Sep-24E yields a revised target price of ₹187 ( ₹180 earlier); maintain ‘BUY’. Rising competition and increasing debt are overhangs on longer-term visibility and potential reasons the stock did not re-rate recently vis-a-vis other platform peers,” the brokerage said.

Kotak Institutional Equities 

According to the brokerage, Nykaa's 22% year-over-year revenue growth was nearly in line with rise of 23% in BPC GMV and 27% in Fashion GMV. A larger proportion of e-B2B segment and lower advertising income contributed to the consolidated GM print of 43.1%, which was down 40 bps qoq. The contribution margin (CM) for BPC decreased by 55 basis points on a quarterly basis to 24.1%, while the CM for Fashion saw a notable improvement of almost 370 basis points on a quarterly basis to 8.3%. Before e-B2B breaks even, additional investments might be needed.

“We cut FY2024 estimates, but broadly retain FY2025-26 estimates. Roll-forward to Sep 2024 leads to a revised FV of ₹170 (Rs165 earlier). Maintain ADD,” the brokerage said. 

Also Read: Shree Cement Q2 Result Preview: Improved realisations, lower costs likely to aid per tonne profitability

JM Financial

Nykaa Fashion attracted the most attention this quarter, despite the BPC segment being the main emphasis throughout the festive quarter. In addition to achieving a record contribution margin of 4.7%, the segment produced 32%/17% NSV increase on a YoY/QoQ basis. The Indian market has become more appealing to BPC brands, leading to a rise in brand discounting in the BPC segment. Nykaa has also experienced a reversal of advertising income on the new platform.

“We reiterate ‘BUY’ rating with target price of ₹210 (about 42% upside) as we find strong conviction on earlier than expected profitability in Fashion,” the brokerage said. 

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