Shares of Nykaa were under pressure on Monday after the company's June quarter results failed to impress the investors. Meanwhile, some brokerages also downgraded the stock and cut earnings estimates or target prices post the earnings, which further impacted investor sentiment.
On Monday, the stock shed over 8 percent to settle at ₹134. However, in intra-day deals, it cracked over 11 percent to ₹130.
The stock has lost over 37 percent in the last 1 year and 13 percent in 2023 YTD.
Nykaa posted an 8 percent year-on-year (YoY) rise in net profit at ₹5.40 crore for the June quarter. Meanwhile, its revenue rose 24 percent to ₹1,421.80 crore in Q1FY24. Ebitda for the quarter, however, surged 60 percent YoY to ₹73.50 crore, with Ebitda margin coming in at 5.2 percent, up 116 basis points versus 4 percent in the year-ago quarter.
Brokerage house Nomura downgraded the stock to neutral post the earnings with a revised target price of ₹163, indicating an upside potential of 21 percent. It expects Nykaa to deliver ahead-of-industry growth ahead but at a higher cost.
Kotak Institutional Equities also downgraded the stock to 'add' from 'buy' and cut its target price to ₹165 from ₹210 a share earlier. The brokerage has cut its earnings per share (EPS) forecast for the fiscal years 2024, 2025, and 2026 by 29 percent, 19 percent, and 17 percent, respectively. This adjustment is reflective of the weaker performance in the first quarter, the continued investments in the eB2B business, and the meticulous efforts aimed at refining growth and profit margins in the fashion and BPC segments, it said.
ICICI Securities, as well, has downgraded the stock to 'Add' with a target price of ₹165.
"Cost-control initiatives yielded a 130 bps YoY contribution margin (CM) improvement in BPC despite a 60 bps YoY gross margin decline as the ad-income from D2C brands was soft as brands increased profit focus (in-line with our expectations). A new ad platform resulted in transition challenges for smaller brands, the brokerage noted, adding that the channel mix worsened. While the management commentary on B2B business achieving EBITDA breakeven in 2-5 years’ time was underwhelming, ICICI Sec believes a tighter calibration of corporate overheads may be needed for Nykaa to meet investors’ margin expectations. We cut its earnings estimates by 9%/8% for FY24E/FY25E," it said.
Meanwhile, BofA retained its neutral call on the stock but cut it price target to ₹160 from ₹175 on the back miss in the Q1 earnings estimates, a slowing growth and less support to its valuation. The downside risk will remain if the competition pressure increases, cautioned the brokerage, adding that the pace of margin will be slower going ahead. It said that the Nykaa shares are fairly valued. It has cut FY23-26 EPS by 17-39 percent.
Finally, Nuvama has maintained its buy call with a target price of ₹180.
FSN E-Commerce (Nykaa) reported in-line performance with consolidated GMV growing 24% YoY. BPC GMV growth was in sync with historical trends while fashion GMV growth saw a sharp deceleration on overall slowdown, said the brokerage. IT added that it has factored in lower growth expectations for fashion, which drives a 5 percent cut in FY24E EBITDA.
