Nykaa shares: Over 56% upside seen as brokerage gives ‘buy’ tag

In a note, the domestic brokerage and research firm attempted to provide objective answers to top 5 investor concerns through macro-economic as well as company specific data and metrics. Its ‘Buy’ rating comes with a target price of March’23 2,120 (about more than 56% above the CMP).

“While the company is likely to face new challenges and opportunities to tackle the post-COVID world (finally?), Data Trends and Nykaa’s strategic choices give us the confidence to continue to see the company continue its profitable Perfectly positioned to sustain growth. trajectory,” the note said.

Nykaa 3C – continues to be a differentiated player with a focus on content, curation and convenience – building a rapidly growing and loyal consumer base, highlighted JMFinancials. The company’s unique solutions to the pain-points of consumers and brands create longer sticks that are likely to endure Nykaa’s dominance in BPC while creating a niche in fashion, it said.

Nykaa’s Q3FY22 GMV raises concerns that growth in fashion has already begun to slow down. However, it needs to be understood that, unlike BPC, fashion verticals do not see as much seasonality.

“Going forward, as the mix of fashion continues to increase in overall GMV, GMV to revenue conversion will continue to be low as revenue only includes take-rate in terms of the marketplace business model and the fashion segment is primarily a marketplace.”

However, the same will result in an increase in the overall gross margin and EBITDA margin with an increase in the mix of fashion as the Marketplace business does not have a COGS component, the brokerage note added.

The views and recommendations given above are those of individual analysts or broking companies and not of Mint.