Nykaa share price down 44% from life-time high; should you buy, hold or sell after Q1 profit surges 33% on-yr-

Nykaa share price down 44% from life-time high; should you buy, hold or sell after Q1 profit surges 33% on-yr?

Nykaa share price rose on Monday after the internet company reported 33% on-year rise in consolidated net profit to Rs 4.55 crore in quarter ended 30 June 2022, as against net profit of Rs 3.42 crore in Q1FY22. (FSN E-Commerce Ventures) Nykaa’s revenue from operations jumped 41% on-year to Rs 1,148.42 crore in Q1FY23. While the stock has risen 1.5% in the last one month, Nykaa shares are still down 44% from its life-time high of Rs 2,573.70, hit on 26 November 2021. Despite the strong performance in April-June quarter, analysts remain sceptical and have mixed views on the stock. Nykaa shares were quoting at Rs Rs 1,414 apiece, up 1.31% on NSE intraday.Should you buy, hold or sell Nykaa shares after Q1 Results?Edelweiss Securities: BuyTarget price: Rs 1,743; Upside: 23%

Analysts at Edelweiss Securities said that Nykaa reported a good performance with sustained growth being the highlight in the backdrop of uncertain consumer sentiment and physical retail surge. While flat unique visitor trends have reversed in BPC, they persist in Fashion, though conversions are driving order growth and AOV/private label share remains robust, they said. The brokerage remains constructive on Nykaa. “It is, globally, a one-of-its kind profitable and management-owned new-age business and offers a multi-decade growth opportunity,” it said. Edelweiss maintains a ‘buy’ call on the stock with a target price of Rs 1,743, down from Rs 1,859 earlier. Key risks remain the possibility of a much lower-than-estimated TAM, emerging competition disrupting the unit economics in BPC and rise in cost of capital.

ICICI Securities: HoldTarget price: Rs 1,400; Downside: 0.7%

ICICI Securities believes that Nykaa continues to present a combination of: largest beauty and personal care (BPC) business in a growth market (India); good profitability metrics and prudent capital allocation; and omni-channel in the ‘true sense’ (going online to offline). However, competition will likely intensify from both vertical and horizontal peers. “While we expect BPC revenues to grow, we believe Nykaa’s journey could be different – it will have to go more mainstream to drive this growth (tougher decisions about brand stretch along the way),” the brokerage said. It maintains its ‘Hold’ rating on the stock with a target price of Rs 1,400 per share.

IIFL securities: ReduceTarget price: Rs 1,400; Downside: 0.7%

According to analysts at IIFL Securities, traction in the BPC business is better than expected on both, topline and margins. In the fashion business, top-line growth is below their expectations and margin seems largely in-line. “We raise our estimates for the BPC business, but cut the overall Ebitda by 4%/6%/0% for FY23ii/24ii/25ii, on account of start-up losses of new businesses,” they said. The brokerage maintains ‘Reduce’ rating on the stock. However, it revised target price upwards to Rs 1,400 from Rs 1,300 earlier, partially on account of rollover and partly owing to higher valuation in the BPC business.

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