Nykaa shares: Key takeaways from FSN E-Commerce Ventures analyst meet, target price

Nykaa, India’s largest online beauty and cosmetics retailer, recently hosted its Annual Investor Day and the management is expecting its beauty and personal care (BPC) business to grow by mid-to-late 20s compounded annually over FY24–28. Nuvama Institutional Equities, which attended the analyst meet said the company’s ambition is to grow Fashion business' net sales value (NSV) by 2.5–3 times in the next three years. 

Among other takeaways, Nykaa is targeting BPC margins to be close to the current level while it expects the Fashion segment to break even by FY26. Nykaa believes the capex got peaked in FY23 and should decline in India while the GCC region will need $3–5 million in capex in the short term to support growth.

The Nykaa management will be focusing on growth by investing back in the business, as it sees profitability improving on better economics of the fashion and retail businesses. 

Following the event, Nuvama retained its 'Buy' recommendation on Nykaa and suggested a DCF-based March 2025 target price at Rs 203.

Given the faster-than-company growth in the Fashion business, overall contribution of the Fashion business will increase 21 per cent in FY29 from 16 per cent of NSV in FY24, Nykaa expects. 

The one of the only few profitable new age company plans to grow Retail gross merchandise value (GMV) at a 40 per cent CAGR over FY24–28E as it plans to increase store count from 187 stores in FY24 to 400-plus by FY28. 

"Super Store (eB2B segment) is witnessing traction, Nykaa is targeting to grow Super Store to 9x FY24 level over the medium term, and expects 3–5% EBITDA margin once it scales up," Nuvama said.

The company management plans to maintain contribution margin in the BPC business at current level and invest additional savings back in business to support growth.

Nykaa expects to improve Ebitda margin by 1,300–1,600 basis points by FY27. It also shared the path to achieve this improvement, with margins improving from current level of -10.3 per cent to break even by FY26 then to mid-single digit by FY27 and 10 per cent in medium term on a steady state basis.

"Unlike BPC, fashion has a curation focused niche positioning, which the management plans to continue. While this will achieve limited scale, it does offer a potential path to profitability and achieving that, in our view, will be a significant value
driver," it said.