Nykaa shares zoom over 8%, touch new 52-week high on strong Q3FY24 update; should you consider buying?

FSN E-Commerce Ventures, the parent company of Nykaa, saw its shares surge by 8.30% in today's intraday trade, reaching a new 52-week high of ₹191.60 apiece. This positive response from investors follows the release of the company's Q3FY24 business update on January 07.

Q3 Business Update

In the Q3FY24 business update, the company projected mid-twenties growth in the gross merchandise value (GMV) of its beauty and personal care vertical, with a net sales value (NSV) growth of approximately 20% on a year-on-year (YoY) basis.

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Additionally, the company expects the fashion vertical's GMV to grow by around 40% in the quarter, with NSV growth in the low thirties on a YoY basis. The company believes that its beauty and personal care (BPC) growth for the quarter outpaces industry growth. However, it notes that current industry growth is below the long-term trajectory and anticipates a return to the median in the near to mid-term, driven by a robust macroeconomic and demographic outlook.

Nykaa highlighted that its reach in the BPC industry has expanded, particularly with the early success of newer businesses such as Superstore by Nykaa. According to the company, this vertical has experienced substantial growth and now constitutes a significant share of its overall NSV.

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For the September quarter (Q2FY24), the company posted a 50% jump in its consolidated net profit to ₹7.8 crore as compared to a net profit of ₹5.2 crore in the same period a year ago.

It reported a 22.4% growth in its consolidated revenues to ₹1,507 crore during the quarter.

Its consolidated beauty and personal care GMV grew 23% year on year (YoY), with a net sale value (NSV) growth of 19% YoY. 

Following this impressive performance, the stock jumped 26.16% in November alone, recording its best monthly performance since March 2022. It finished CY23 with a gain of 12.33%, and in the current month so far, it is up by 6.90%.

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Global brokerage firm JM Financial has a 'buy' call on the stock with a target price of ₹210 apiece. The brokerage is confident in the earlier-than-expected profitability of Nykaa's fashion segment.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.