Nykaa stock gains 6% post Q2 update, Morgan Stanley shares target price

FSN E-Commerce Ventures Ltd, which operates Nykaa, posted a strong provisional business update for the September quarter, with Morgan Stanley maintaining its Overweight rating and seeing 10% upside in the stock. The brokerage has a target price of Rs 356.

Nykaa's provisional Q2 FY27 business update indicated consolidated GMV growth close to the thirties, NSV growth in the early thirties and net revenue growth in the late twenties. The Beauty business reported NSV and net revenue growth in the late twenties, while Fashion NSV growth was in the late forties and net revenue growth was in the early forties.

Morgan Stanley subsequently assessed Nykaa's provisional update in its report titled "2QFY27 Beat: Another Very Strong Quarter". The brokerage said the update pointed to a strong quarter, with consolidated revenue growth tracking in the high twenties, ahead of its 26% estimate. It also expects Beauty revenue growth in the high twenties, versus its 25% estimate, while Fashion net revenue growth is seen in the low 50s, compared with its earlier estimate of 35%. The "beat" therefore refers to the provisional Q2 performance coming in ahead of Morgan Stanley's estimates, rather than Nykaa having already reported final quarterly results.

For the longer term, Morgan Stanley estimates Nykaa's revenue at Rs 100,224 million in FY26, rising to Rs 128,317 million in FY27, Rs 163,948 million in FY28 and Rs 208,897 million in FY29. Its EPS estimates for the same years stand at Rs 0.76, Rs 1.53, Rs 2.53 and Rs 3.97, respectively.

On Monday, FSN E-Commerce Ventures shares touched a high of Rs 342.95, up 6.11% from the previous close of Rs 323.20.

Within Beauty, Nykaa added 14 net new stores during the quarter, taking its total store count to 338 as of September 30. Like-for-like store sales growth was in the early twenties, which Nykaa said was its strongest performance in the last six quarters. The company also continued to see strong growth in its Beauty business.

Fashion remained another key growth driver. Nykaa added more than 250 brands during the quarter, while its partnership with Nike showed early traction. While Nykaa's own provisional update put Fashion NSV growth in the late forties and net revenue growth in the early forties, Morgan Stanley's estimate for Fashion net revenue growth was higher, at the low 50s.

The festive season timing is also important to the quarter's performance. Nykaa said festive-led growth had shifted from Q2 to Q3 this year.