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Nykaa shares tank 6% amid market sell-off! What should investors do?

Nykaa shares tank 6% amid market sell-off! What should investors do?

The stock ended 4.73 per cent lower at Rs 2,321.85 against the previous close of Rs 2,437.15. Market cap of the firm fell to Rs 1,09,806.61 crore.

Nykaa shares tank 6% amid market sell-off! What should investors do? Nykaa shares tank 6% amid market sell-off! What should investors do?

Shares of Nykaa (listed as FSN E-Commerce Ventures Limited) tanked 6 per cent to hit an intraday low of Rs 2,283.55 on the Bombay Stock Exchange (BSE) on Friday.
 
The stock ended 4.73 per cent lower at Rs 2,321.85 against the previous close of Rs 2,437.15. Market cap of the firm fell to Rs 1,09,806.61 crore.
 
HSBC initiated coverage on the stock with a 'Buy' rating and a target price of Rs 2,900 per share.
 
"We expect revenue to double every two three years in the coming decade, which we see as the chief catalyst for the stock. Marketing costs are likely to remain high for the next two-three years, which could put pressure on margins," it said.
 
It further added that Nykaa is still in an exponential growth phase and should remain so for a long time. The company is a rare combination of profitability and sustainable, exponential growth.
 
However, the brokerage and research firm Dolat Capital initiated coverage with a 'Sell' rating and a target price of Rs 1,600 per share.
 
"The strengths of Nykaa highlight themselves in the unique combination of growth and profitability – a rarity in the internet space. Led by its strong business position, we expect it to trade at a scarcity premium. But current valuations at 19.4/13.7x FY23/24E EV/Sales seem too rich for our comfort, howsoever long we may stretch the timeline," it said.
 
According to brokerage firm Prabhudas Lilladher, Nykaa's entry into the fashion segment holds promise with a focus on premium customers, curated and managed marketplace offering over 1.8 million stock keeping units (SKUs), private labels like NYKD, Pippa Bella, 20 dresses and industry-leading average order value (AOV) of Rs 3977 and 25 per cent contribution to gross merchandise value (GMV) in 5MFY22.
 
"Although we expect lower margins in FY22 (lower ad spend in FY21), we expect steady margin expansion led by scale economies as it has already expanded margins from 1.8 to 6.6 per cent over FY19-21 making it one of the few e-commerce players to turn profitable," it added.
 
FSN E-Commerce Ventures Ltd, which operates online beauty e-commerce platform Nykaa, reported over 95 per cent year-on-year (YoY) decline in consolidated net profit at Rs 1.2 crore for the July-September quarter as its expenses shot up. It had posted a profit of Rs 27 crore in the year-ago period.
 
The company's revenue from operations rose 47 per cent year-on-year (YoY) to Rs 885.3 crore from Rs 603.8 crore in the corresponding quarter of last year.
 
Shares of Nykaa listed at a premium of 79 per cent to the issue price, marking a strong listing for the online beauty retailer. The subsidiary of FSN E-Commerce Ventures Ltd made its market debut at Rs 2,001 per share on the BSE against the IPO issue price of Rs 1,125.

 

Published on: Dec 03, 2021, 5:19 PM IST
Posted by: Tanya Aneja, Dec 03, 2021, 5:16 PM IST