Kotak Institutional Equities thinks that Rs 210 is a fair price for Nykaa shares. The goal that Nuvama Institutional Equities has set is Rs 186. The stock is worth Rs 120, according to HDFC Institutional Equities.
The March quarter results for FSN E-Commerce Ventures Ltd (Nykaa) were good, so a few brokerages offered price targets of up to Rs 210 for the stock. But there were still experts who did not think the counter would go up because growth was slowing.
Kotak Institutional Equities and JM Financial both agree that Rs 210 is a fair price for the stock. The stock is worth Rs 188 to Morgan Stanley. The goal for each share of stock set by Nuvama Institutional Equities is Rs 186. Both Goldman Sachs and BofA Securities think that the stock will reach a price of Rs 175. JPMorgan set a target of Rs 125, and HDFC Institutional Equities set a goal of Rs 120, which suggests that the stock could go down in the future.
Nuvama Institutional Equities said that Nykaa’s reported Q4 Ebitda was in line with expectations. The most important thing was that delivery and marketing costs were lower than expected. It said that the rise in gross profit makes worries about Q3 results go away. Gross merchandise value (GMV) growth was solid but slower than in previous quarters, and fashion order growth was only 8% year over year. the business said.
The emphasis on sustainable growth and profit margins rather than rapid expansion is plain to see. Even so, Nykaa going into net debt is not ideal, even though it is a result of growth and storing.
For Kotak Institutional Equities, Nykaa’s revenue growth of 34% YoY was 2% higher than expected. This was helped by the fact that BPC GMV grew by 29% YoY and fashion GMV grew by 38% YoY. Kotak said that the BPC business was doing well, with a contribution margin of 25.7%, a good 500 bps yoy margin expansion, and operating leverage as the main reason for this.
We anticipate a similar situation in FY2024, with the fashion and B2B businesses continuing to operate at a loss and being financed by BPC cash flows. In FY2023, fixed costs went up because staff costs and lease rentals went up. In FY2024, these costs should go down. We raise the expected loss from the fashion industry, but this is more than countered by the BPC business’ increased profitability. We make some small changes to our predictions, but we are still recommending BUY with a new FV of Rs210 (it was Rs215 before),” it said.
HDFC Institutional Equities said that Nykaa’s profits did not meet their expectations. They also said that BPC segment’s annual unique transacting customers (AUTC) continued to drop and that ad income as a percentage of sales fell 100 bps YoY.
HDFC Institutional Equities said that without ad revenue, the lack of non-linear ways to make money pushes the brokerage to set its valuation compass somewhere between a straight business and a pure platform. The brokerage cut its expectations for Ebitda for FY24/25 by 1% to 2% and kept its “reduce” rating on the stock.
