Shares of Nykaa's parent company, FSN E-commerce slipped 2.5 percent on October 8 even after the company reported strong business updates for the July-September quarter, highlighting mid-twenties-on-year growth in revenue.
At 09.20 am, shares of FSN E-Commerce were trading at Rs 189.29 on the NSE.
Nykaa’s beauty segment also delivered strong mid-twenties growth in both net revenue and net sales value (NSV), with gross merchandise value (GMV) growth even higher. This expansion was driven by solid performance across omnichannel retail, owned brands, and e-B2B distribution, ahead of the festive season. Dot & Key, a skincare brand in which Nykaa holds a 90 percent stake, continued its impressive growth trajectory.
Brokerage firm Nomura, which has a 'neutral' call on the stock with a target price of Rs 203, sees the revenue growth in a positive light, suggesting that improvement for the company was on track, led by its beauty and personal care segment.
The fashion vertical saw NSV growth in the early teens, while overall revenue for the segment rose by the early twenties. Nykaa's content platform, LBB, also contributed significantly to this growth, further boosting the fashion vertical’s performance, as noted in a stock exchange filing.
Meanwhile, the beauty and fashion company also sees a revival in growth momentum in the coming quarters. "The fashion industry is expected to experience similar growth momentum in the longer term. However, consumption has witnessed subdued demand in the first half of this financial year but the industry expects to see a gradual revival during the second half, driven by the festive and wedding season," it said in an exchange filing.
Overall, demand in India’s beauty market remains strong, driven by higher per capita income and consumption rates, it added.
Going ahead, brokerage firm Citi forecasted a 25 percent on-year revenue growth for FSN E-Commerce, largely based on the management's commentary. Aside from that, Citi pegged EBITDA growth for the company at 47 percent on year, with margins expanding 100 basis points on year to 6.3 percent.
Despite the positive growth forecasts, Citi still has a cautious stance on Nykaa with its 'sell' rating on the stock along with a price target of Rs 165.
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