Nykaa share price targets: Jefferies sees stock at Rs 200, Nomura Rs 183, Macquarie Rs 115!

FSN E-Commerce Ventures (Nykaa) saw a host of brokerages updating their views and share price targets on the stock post Annual Investor Day 2023. Nykaa, analysts said, re-iterated its earlier targets, with focus on sustainable profitability over aggressive growth being the key message.

The company used the event to elaborate on the ‘realistic’ total addressable market (TAM) and consumer base potential for Nykaa, rationale for investments in technology, deep-dive on owned brands and strategic decision making in beauty and personal care (BPC), Fashion and Others segments. The management though resisted from providing any forward guidance.

Macquarie has suggested a target of Rs 115, as it saw no tangible medium term growth targets. It cited concerns over capital-intensive growth amid rising competition. Jefferies, on the other hand, suggested a target of Rs 200 on the stock. Nomura India finds the stock worth Rs 183 while the most optimistic price target was that of JM Financial and Elara Securities at Rs 210 each.    

"We continue to estimate a strong 25 per cent CAGR for BPC over FY23-30F. However, we factor in fashion CAGR at 13 per cent with a terminal year mix of 5 per cent to NSV. We factor in overall revenue CAGR of 25 per cent over FY23-30F and Ebitda margin to expand to 12.7 per cent by FY30F (from 5.4 per cent currently). With major expenses on employee costs and warehousing behind, we believe the steady margin expansion should continue over the next few years," Nomura India said.

This brokerage has maintained its 'Buy' rating on Nykaa stock, as it finds valuation at 5.1 times FY25F EV/Sales attractive, given the strong growth outlook.

Nuvama noted that Nykaa has not given any specific target, but mentioned that Ebitda margins for both BPC and Fashion segments can be low to mid-teens, and Superstore will at best be 3–5 per cent. Also, versus last year, it has managed to moderate marketing and especially fulfilment expenses, Nuvama said.

"Stable growth in BPC along with profitability improvement is admirable. Going forward, comfort on competition, given two large independent beauty platforms have been launched in the last one year, and cash flow generation (debt moderation), as per us can drive re-rating," said Nuvama Institutional Equities. This brokerage values Nykaa at Rs 186 Nykaa shares, it said, are trading at 5 times FY25E EV/sales as compared with 4.8 times offline retail segment peers.

JM Financial said Nykaa’s segments can grow at multiples of base industry growth rates with substantial margin expansion opportunity driven by higher BPC/Fashion consumption per capita and premiumisation.

"We continue to believe in Nykaa’s right to win in BPC (both B2C and eB2B) while expecting Fashion segment to focus on sustainable growth in premium fashion and hence reiterate our ‘BUY’ rating with Jun’24 target price of Rs 210," JM Financial said.

Elara Securities has maintained its target of Rs 210, as it values the BPC segment on EV/Ebitda of 60 times one-year forward and has not assigned any value to the fashion and others business for now.

"Nykaa aspires to achieve revenue growth ahead of the industry average. We estimate revenue CAGR of 25.8 per cent in the online BPC segment, led by intensifying competition, near-to-medium term," it said.