Nykaa shares fall ahead of Q3 results. Here're analyst projections

Shares of FSN E-Commerce Ventures (Nykaa) fell 2 per cent in Monday's trade ahead of the Falguni Nayar-led company's December quarter results. The scrip fell 2.23 per cent to hit a low of Rs 151.25, even as the company is expected to report strong set of top and bottom line growth.

Kotak Institutional Equities expects Nykaa to report a 47.7 per cent YoY rise in profit at Rs 41.30 crore for the December quarter compared with Rs 29.70 crore in the same quarter last year. It sees sales rising 39.1 per cent YoY to Rs 1,527.70 crore against Rs 1,098.40 crore YoY, primarily on account of the festive season, flagship sale and continued growth in BPC (up 35 per cent YoY) and fashion business (27 per cent YoY). Ebitda margin is seen expanding to 7.3 per cent from 6.3 per cent YoY.

"We bake in sequentially higher ad-spends on account of the festive season and higher brand building activity. Despite that, improving gross margin and operating leverage should lead to an Ebitda margin improvement of 230 bps sequentially," it said.

HDFC Institutional Equities expects sales to rise 37 per cent YoY to Rs 1,500 crore on account of festive season and flagship sale event. The brokerage expects BPC and Fashion segments to log 31 per cent and 43 per cent YoY growth, respectively, in GMV. BPC's average order value (AoV) is expected to stay healthy at Rs 2,000, it said. HDFC Institutional Equities is building in a 150 bps Ebitda margin expansion YoY at 7.8 per cent, courtesy favourable operating leverage.

All eyes would be on commentary on fashion segment, unwinding of working capital and competitive landscape shift.

While there has been a tougher macro environment, JM Financial said Nykaa's BPC segment may still do well due to the relative inelasticity of Nykaa shoppers. Nykaa Fashion, however, might still not see market share gains due to heightened competitive intensity but can still deliver decent growth on the small base.

"We anticipate Nykaa to deliver 29 per cent YoY growth in GMV  and 26 per cent YoY growth in revenue led by strong growth in fashion and new initiatives. With BPC business delivering strong operating leverage and company-wide lowering of fulfilment costs from regional centres, we expect overall Ebitda margin to improve 152 bps sequentially and 21 bps YoY," JM Financial said.