Nykaa shares in focus as CEO for Nykaa Fashion unit resigns

Shares of FSN E-Commerce Ventures Ltd (Nykaa) are in focus on Friday morning after Nihir Parikh resigned as for CEO for Nykaa Fashion.com, a business unit of wholly-owned subsidiary Nykaa Fashion, citing personal commitments. Parikh was a senior management personnel of the company and his resignation was effective from the close of business hours of December 5.

Nykaa shares have fallen 7.6 per cent in the past one month against a 1 per cent rise in the BSE 500 index.

To recall, Nykaa Fashion reported GMV/NSV growth of 10 per cent and 14 per cent YoY in the September quarter as muted demand environment continued in Q2. Besides this, Q2 had seen fewer wedding dates and festivities further hampering the segment growth.

However, strong performance by LBB (marketing income) and higher services related income resulted in better GMV-Revenue conversion with revenue growing 22 per cent YoY.

"Gross margin demonstrated sharp improvement of 567bps YoY to reach 49.7 per cent whereas decline in fulfilment expenses offset the increase in marketing expenses, led to contribution margin (as % of NSV) improvement of 440bps YoY to reach
9.4 per cent," JM Financial noted last month.

The Nykaa management expects fashion outlook in 2H to improve as October has seen some pickup and also festivities and wedding season in H2 are expected to be strong.

"Growth in the fashion business continues to remain subdued due to overall slowdown in the industry as well as shifting of festive purchases to H2 compared with last year. Marketing spends remain elevated to support overall growth although at cost of margins," Nuvama said post Nykaa's Q2 results.

The brokerage has cut its FY25, FY26 and FY27 PAT estimates for Nykaa by 8.2 per cent, 8 per cent and 8.7 per cent, respectively. It retained ‘Buy’ on the stock and continued to value Nykaa using DCF, yielding a target price of Rs 205 against Rs 220 earlier.

JM Financial suggested a target price of Rs 250 on the counter.