Nykaa shares crack 11% as analysts cut stock price targets after Q1 miss

FSN E-Commerce Ventures Ltd's  (Nykaa) June quarter results missed Street estimates a bit.  While the new age company is performing well compared to peers, its margin expansion trajectory is tracking below expectations, said analysts who cut share price targets for the stock post Q1 results. Nomura India expect Nykaa to deliver ahead-of-industry growth ahead but at a higher cost. This brokerage has downgraded the stock to 'Neutral' with at revised target price of Rs 163.

Nuvama Institutional Equities said it is factoring in lower growth expectations for fashion division, which drove a 5 per cent cut in its FY24 Ebitda estimates. This brokerage has rolled over its estimates to June 2024 yields and suggested a revised target of Rs 180 from Rs 186 earlier. Analyst targets, however, suggest healthy upside ahead for the stock.

"While BPC growth is admirable and core to value (75:25 split BPC: Fashion), rising competition, turning net debt are overhangs on longer-term visibility and potential reasons for missing the recent re-rating versus other platform peers," Nuvama said.

The stock plunged 11 per cent to hit a low of Rs 130 on BSE.

Nykaa had on Friday reported an 8 per cent year-on-year (YoY) rise in net profit at Rs 5.40 crore for the June quarter on 24 per cent rise in revenue at Rs 1,421.80 crore, the company said in a BSE filing. Ebitda for the quarter surged 60 per cent YoY to Rs 73.50 crore, with Ebitda margin coming in at 5.2 per cent, up 116 basis points over 4 per cent in the year-ago quarter. Gross mechandise value (GMV) grew 24 per cent YoY to Rs 2,667.80 crore for the quarter.

For Nuvama, Nykaa’s  GMV growth was in-line. While BPC GMV growth at 24 per cent was in sync with historical trends, Fashion GMV growth at 12 per cent was a sharp deceleration from 38 per cent growth in Q4,  attributed to the overall slowdown and also Nykaa’s focus on profitable growth, the brokerage noted.

JM Financial said while the company did deliver robust average order value and improvement in ordering frequency, net addition of just 3 lakh/1 lakh customers in BPC/Fashion made it lower its GMV estimates.

"However, we expect sustained higher AOVs to drive margin improvements. We roll forward to Sep’24 and reiterate ‘BUY’ rating with target of Rs 210 (44 per cent upside) as we find more conviction on earlier profitability in Fashion," the brokerage said.

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