Analysts believe even though the company posted a healthy Q2, some segments did not fare as per expectations; Should you buy?
Nykaa share price jumped over 5 per cent in early trade on Wednesday, November 13, after the company reported strong results for the second quarter of the financial year 2024-25 (Q2FY25). Nykaa shares rallied as much as 5.74 per cent to Rs 187.85 apiece on the BSE.
Around 9:46 AM, Nykaa share price was up 1.15 per cent on BSE at Rs 179.7 per share. In comparison the BSE Sensex was down 0.18 per cent at 78,531.2.
Read More: Swiggy IPO to unlock Rs 9K-crore benefits for employees
Nykaa on Tuesday, after market hours, reported a consolidated net profit (attributed to owners) for the second quarter at Rs 10.04 crore as compared to Rs 5.85 crore a year ago, up 72 per cent. On a quarter-on-quarter basis, the net profit was 4 per cent higher.
The revenue from operations for the quarter under review stood at Rs 1,874.74 crore as compared to Rs 1,507.02 crore a year ago which implies a rise of 24.2 per cent.
The Earnings before interest, tax, amortisation, and depreciation (Ebitda) for the quarter under review stood at Rs 104 crore, up 29 per cent, as compared to Rs 81 crore. Similarly, Ebitda margins for the quarter stood at 5.5 per cent as compared to 5.4 per cent a year ago.
Analysts believe even though the company posted a healthy Q2, some segments did not fare as per expectations.
Read More: NTPC Green Energy sets IPO price band: Check GMP and other details
Brokerage firm Nuvama Institutional Equities expects an improvement in growth in H2 due to higher festive and wedding demand.
“We continue to forecast an improvement in profitability on the back of operative leverage, although we have moderated our expectations due to elevated marketing spends. We are reducing FY25, FY26 and FY27 PAT estimates by 8.2%, 8.0%, 8.7%,” Nuvama Equities said.
The brokerage firm maintained a ‘Buy’ rating on Nykaa shares but cut the target price to Rs 205 per share from Rs 220 earlier.
Kotak Institutional Equities trimmed its FY2025-27 EBITDA estimates by 6-9% as it assumes lower profitability in the BPC business on account of higher marketing spends and S&D expenses as well as slightly higher loss run-rate for the eB2B business.
“We also note a potential risk from quick commerce companies, which continue to add brands and SKUs and may eventually put pressure on Nykaa’s fulfilment costs. We also align depreciation charge to 1HFY25 run-rate resulting in a sharply higher EPS cut,” said the brokerage firm.
It retained a ‘Sell’ rating and reduced Nykaa’s share price target to Rs 170 apiece from Rs 190 earlier.
Read More: Stock Market Updates: Sensex Down 150 Points, Nifty Below 23,850; Nykaa Rises 5%
JM Financial said, in a quarter where consumption names disappointed, Nykaa delivered decent growth numbers with BPC/Fashion delivering 29 per cent/10 per cent year-on-year Y-o-Y growth. Though BPC growth did get a boost from 80 per cent Y-o-Y in eB2B business, core BPC GMV growth came in at a robust 26 per cent.
With customer acquisition remaining prominent, core BPC saw a dip in GMV- net sales value (NSV) conversion while ad expenses also inched up. Overall, the company reported 24.4 per cent Y-o-Y growth in revenue to reach Rs 1,874 crore with Ebitda margin flat sequentially at 5.5 per cent, missing our estimate by 50 bps. Despite the miss, we believe the core BPC Ebitda margin continued to improve with a 20 bps jump Y-o-Y while Fashion losses sustained around Rs 25 crore.
We forecast core BPC to sustain Ebitda margin improvement driven by operating leverage while other segments will see peak losses in FY25. We find downside limited with favourable risk reward making Nykaa the top pick in the internet space.
The brokerage retained ‘Buy’ while maintaining the target price at Rs 250 per share.
Disclaimer:Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.
