Nykaa Shares Rise 6% After Q1 Net Profit Soars 152% YoY; Buy, Sell Or Hold?
Shares of FSN E-Commerce Ventures soared as much as 5.76 per cent at Rs 197.35 per share on the BSE in Wednesday’s intraday trade after the company on Tuesday reported a 152 year-on-year (YoY) surge in net profit at Rs 13.64 crore for the quarter ended June 2024 as compared to Rs 5.42 crore posted by the beauty & personal care company in the year-ago period.
The revenue from operations for the reporting quarter stood at Rs 1,746.11 crore, which was up 23 per cent from Rs 1,421.82 crore reported in the corresponding quarter of the previous financial year.
The company noted that growth in its physical retail business was slower due to factors such as elections and heat waves in North India.
Additionally, FSN E-Commerce Ventures is increasing its stake in Dot & Key, a cosmetics brand under its portfolio.
Currently holding 51 per cent of Dot & Key, the company plans to acquire an additional 39 per cent from the company’s promoters, raising its total stake to 90 per cent by September 30, 2024.
The acquisition will cost Rs 265.3 crore. Dot & Key generated Rs 198 crore in revenue for FY24.
At 09:48 AM; the stock price of the company pared all its gains and was trading 0.40 per cent lower at Rs 185.85 per share on the BSE. By comparison the BSE Sensex surged by 0.14 per cent at 79,067 levels.
FSN E-Commerce Ventures is involved in the manufacturing, selling, and distribution of beauty, wellness, fitness, personal care, health care, skin care, and hair care products. These products are sold through various channels, including online platforms such as e-commerce and m-commerce, as well as offline stores and stalls. The company launched an initial public offering (IPO) of Rs 5,352 crore in late October 2021.
Here is how brokerages view the Q1 update:
Nuvama Institutional Equities expects sales and marketing expense to remain range-bound going ahead, as the company focuses on profitable growth. Operating leverage would be the key margin lever going forward, the brokerage said.
Nuvama said Nykaa delivered a strong growth in BPC but Fashion segment’s gross merchandise value (GMV) growth missed expectations due to a slowdown in the underlying market. Margin improved YoY largely due to Fashion and B2B, it said as the domestic brokerage tweaked its FY25 and FY26 PAT estimates by about 2 per cent each.
Nykaa shares are up 40 per cent in the past one year. Nuvama rolled over its DCF value to March 2026 and arrived at a revised target price of Rs 220 for Nykaa against Rs 203 earlier.
Investec retained its buy rating on Nykaa but hiked the target price to Rs 205 from Rs 203.
Higher margin expansions are still awaited. Focus is on driving new customer growth and metrics are improving in the fashion segment. Investec believes Nykaa’s performance is trending in the right direction though margin 5900 improvement and expects that the revenue and EBITDA growth trends to accelerate from the current quarter.
JP Morgan has maintained an underweight rating on the stock with a target price of Rs 138.
For the beauty segment, higher marketing spends weigh on margins while in fashion, revenue growth was weak and the margin expansion came through.
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