Nykaa, the leading online beauty and personal care retailer, reported impressive earnings for the third quarter of FY25, which prompted notable reactions across the stock market. For the quarter ended December 31, 2024, the parent company, FSN E-Commerce Ventures, recorded a staggering 61% surge in net profit, rising to ₹26.12 crore from ₹16.18 crore year-on-year. Simultaneously, its consolidated revenue rose by 27% to ₹2,267 crore, aligning with market expectations.
The reported earnings came as Nykaa experienced significant growth within its beauty and fashion segments. The firm’s Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) landed at ₹141 crore, producing a margin of 6.2%, both metrics being embraced positively by analysts. On successive quarters, this was marked by over 100% growth from ₹10 crore reported previously.
Analysts were quick to highlight the strong demand driving these impressive numbers. Anshul Jain, the Head of Research at Lakshmishree Investment and Securities, noted, "Robust demand in the beauty and fashion segments contributed to strong topline growth. Nykaa's performance highlights its resilience in the e-commerce environment, positioning it well for future expansion." Such sentiments reflect the growing confidence investors have toward Nykaa's strategies.
Following the announcement, Nykaa shares reacted swiftly, initially gaining nearly 3% on February 11, trading at around ₹171.85 after opening at ₹169.60. The stock closed up at ₹174.60, demonstrating interest from investors buoyed by the announcement of solid earnings. The counter saw increased buying interest predominantly attributed to several brokerages maintaining neutral to positive outlooks after the Q3 report.
Reports indicated the average price target for Nykaa shares is estimated around ₹193, proposing potential upside of 14% from current levels. This includes consensus recommendations from 24 analysts, emphasizing their ‘Buy’ ratings post the earnings announcements. Nuvama Institutional Securities echoed similar sentiments, highlighting expectations for continued growth driven by the beauty segment, even amid increasing competition.
Brokerages were quick to adjust their targets following Nykaa’s report. For example, Mirae Asset Capital Markets raised its recommendation to 'Buy' with an ambitious target of ₹207, indicating optimism about Nykaa's strategic efforts and continued market share expansion. Meanwhile, others like Morgan Stanley maintained their 'Overweight' rating with targets at ₹200 and Jefferies increased their target from ₹220 to ₹240, anticipating potential gains of up to 42% based on the last close price.
The company also noted its increasing operational efficiency, underlined by over 221 physical stores opened across 73 cities, with the beauty and fashion segments boasting GMV productivity levels marked at ₹4,250 per square foot per month. The FTSE index indicated strong performance, with the consolidated GMV also up by 25% year-on-year.
Industry experts suggest holding Nykaa shares with caution moving forward. Mahesh M Ojha from Hensex Securities recommended investors to buy the stock within the ₹167 to ₹169 range, setting near-term targets at ₹185 to ₹200. Investors were advised to maintain stop loss measures below ₹158 to safeguard against possible fluctuations. Though optimism persists, some analysts caution against excessive investment until the stock reclaims its 200-Day Moving Average, currently around ₹180.
Despite Nykaa's best efforts, some analysts maintained bearish positions. Citi reiterated its 'Sell' rating, pushing the target to ₹160, expressing concerns over falling short of profit expectations post-earnings release. Similarly, JP Morgan has chosen to retain their 'Underweight' stance with targets at ₹165. Nevertheless, global brokerages are upbeat about Nykaa’s consistent performance across segments, with greater focus on the beauty sector indicating stronger demand dynamics.
Overall, Nykaa’s Q3FY25 results depict not only substantial financial growth but also resilience amid competitive pressures. The market’s positive response affirms the brand's potential for continued expansion, bolstered by significant revenue boosts, effective management strategies, and increasing market presence. Investors remain attentive, gauging their positions as Nykaa forges onward amid the dynamic e-commerce climate.