Shares of FSN E-Commerce Ventures (Nykaa) fell over 2 per cent in Thursday's trade after the new age company, in its March quarter business update, said consumer pullback in discretionary spends has had some impact on fashion business, leading to subdued growth in net sales value (NSV) this quarter. Besides, the company expects a revenue growth in Fashion business to be in late teens. This is against a 33 per cent growth it recorded in the first nine months of the financial year.
Following the development, the stock fell 2.34 per cent to hit a low of Rs 133.35 on BSE. With this, the scrip has fallen 14 per cent in 2023 so far.
In its beauty cosmetic and personal care (BPC) segment, Nykaa's NSV was up 26.5 per cent YoY in the third quarter and 34 per cent in the 9MFY23.
"Given the strong traction, we expect 4QFY23F NSV to be up 28 per cent YoY, leading to 32 epr cent YoY growth for FY23F. This is slightly higher than our estimate of 31 per cent YoY for FY23F. However, we expect growth momentum to normalise to 27 per cent CAGR over FY23-25F, which seems to be on track," Nomura India said.
In the case of fashion, this brokerage expects NSV growth to moderate to 17 per cent YoY in the March quarter against 32 per cent YoY in 9MFY23.
"This implies 28 per cent YoY growth in FY23, slightly lower than our 29 per cent YoY growth expectation for FY23F. Moreover, over FY23-25F, we had factored in 26 per cent CAGR, which can be much slower. However, with the focus on unit economics and profitability, margin turnaround can be faster," Nomura said.
For March quarter, the brokerage expects overall revenue growth of 35 per cent YoY and Ebitda margins at 5.5 per cent (up 20 bps QoQ), with scope of an upside risk. This implies 2 per cent upside risk to FY23 revenue and 9 per cent upside risk to FY23 Ebitda estimates, Nomura said while suggesting a target of Rs 214 on the stock.
"In our DCF model, over the long-term (FY25-40F), we factor in NSV CAGR of 19 per cent/17 per cent for BPC/Fashion, leading to 85 per cent/12 per cent NSV mix in FY40F (80 per cent/15 per cent in 3Q). The lower growth trajectory for fashion could pose some risk to our revenue estimates. However, the strong growth in BPC amidst consumption slowdown and increasing focus on profitability may be seen positively by the Street," it said.
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