Nykaa Surges 3% as Growth Outlook Boosts Stock, Analyst Raises Target

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AuthorKavya Nair|Published at:
Nykaa Surges 3% as Growth Outlook Boosts Stock, Analyst Raises Target
Overview

Nykaa shares advanced over 3% on Monday following the e-commerce firm's projection of upper-mid-twenties revenue growth, driven by strong beauty segment performance and fashion revival. Brokerage JM Financial maintained its 'Buy' rating and hiked its target price to ₹325, identifying Nykaa as a clean compounding story in India.

FSN E-Commerce Ventures Ltd., the parent company of beauty and fashion retailer Nykaa, saw its shares climb more than 3 percent on Monday. The stock's upward movement followed the company's announcement that it anticipates revenue growth at the higher end of the mid-twenties range.

Strong Revenue Outlook Drives Stock

The e-commerce platform's stock reached an intraday high of ₹272.9 per share, marking its most significant daily gain since December 30. As of 9:32 AM, FSN E-commerce stock was trading 1.8 percent higher, contrasting with a 0.16 percent dip in the benchmark Nifty 50. The stock hit its highest point since November 25 and is currently trading at 5.3 times its average 30-day trading volume. Over the past year, Nykaa's stock has surged 63 percent, significantly outpacing the Nifty 50's 11 percent advance. The company commands a market capitalization of ₹77,316.77 crore.

Performance Drivers

Nykaa reported that its consolidated gross merchandise value and net sales value growth are expected to be in the late twenties. This robust performance is attributed to a resurgence in its fashion vertical since the start of the fiscal year, coupled with the beauty segment's consistent strength. The company anticipates consolidated net revenue growth at the upper end of the mid-twenties, indicating a slight acceleration from previous quarters. The beauty vertical, in particular, is projected to achieve net sales value growth in the late twenties, representing its fastest pace in six quarters. This growth occurred during a seasonally strong period, making it the company's largest quarter to date in absolute terms.

Analyst Upgrades Reinforce Confidence

Brokerage firm JM Financial highlighted a notable pickup in the beauty and personal care segment, estimating net sales value and revenue growth at 28-30 percent and 26-27 percent year-on-year, respectively. These figures slightly exceeded JM Financial's expectations. The firm projects fashion net sales value growth around 24-26 percent year-on-year, with revenue growth in the late teens. JM Financial forecasts an expansion in Ebitda margin by approximately 130 basis points year-on-year, aligning with improvements seen in the second quarter.

The brokerage views the third quarter as shaping up to be "decent," supported by strong seasonality and consistent execution. JM Financial expects Nykaa's recent outperformance to continue, characterizing the company as one of the "cleanest compounding stories" in India. Consequently, the firm raised its target price for Nykaa to ₹325 for March 2027, up from ₹310, while reiterating its 'Buy' rating.

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