Nykaa hits new all-time low, slumps 9%; down 34% in a month

Since February 9, 2022, in the past seven trading sessions, the stock has dipped 27 per cent after the company reported a disappointing set of numbers.

Shares of FSN e-Commerce Ventures, the parent company of beauty e-tailer Nykaa, continued to remain under selling pressure, hitting a new low of Rs 1,371.35, on slipping 9 per cent on the BSE in Thursday’s intra-day trade.

At 11:01 am; the stock traded 6 per cent lower at Rs 1,416, as compared to a 0.11 per cent rise in the S&P BSE Sensex. The trading volume at the counter nearly doubled with a combined 2.8 million equity shares changing hands on the NSE and BSE.

The stock of the cosmetics-to-fashion retailer tanked 34 per cent in the past one month, as compared to a 6 per cent decline in the benchmark index. The stock has now corrected 47 per cent from its record high of Rs 2,574 touched on November 26, 2021. The company had issued shares at a price of Rs 1,125 per share in its initial public offer (IPO).

Since February 9, 2022, in the past seven trading sessions, the market price of Nykaa dipped 27 per cent after the company reported a disappointing set of numbers, with a 58 per cent year-on-year (YoY) decline in its December quarter (Q3FY22) profit after tax (PAT) at Rs 29 crore, hit by a jump in expenses and subdued demand for personal care and fashion products. Revenue from operations of the company grew 36 per cent YoY at Rs 1,098 crore.

Earnings before interest tax and depreciation and amortization (EBITDA) margin contracted 697 bps at 6.3 per cent from 13.2 per cent in Q3FY21. On a sequential basis, EBITDA margin improved 302 bps from 3.3 per cent in Q2FY22.

For the first nine months (April-December) of FY22, Nykaa reported 23 per cent YoY decline in PAT at Rs 33.7 crore. EBITDA margin declined 213 bps at 4.5 per cent from 6.6 per cent in same period of FY21. Revenue from operations, however, rose 65 per cent YoY at Rs 2,801 crore.

Analysts at Kotak Securities trimmed FY2022-24 revenue forecasts by 2 per cent based on the 9MFY22 performance, largely on lower Beauty and Personal Care (BPC) revenues. The brokerage firm believes ad-spends will stabilize at 11-12 per cent of revenues in the next 2-3 quarters though quarterly volatility will remain. “We assume higher GMs, though we also bake in higher store opening costs resulting in higher depreciation/interest cost. This result in 2-3 per cent EPS cut for FY2022-23,” analysts said in result update.

Analysts at IIFL Securities also expect margins to recover in FY23 on the back of normalcy in sales as Covid abates; normalisation of ad spend after a high FY22; and stabilisation of fulfillment cost as supply chain normalises and new warehouse operations get optimised.

However, likely increase in competitive intensity, with Tata, Reliance, Purplle, MyGlamm and Myntra vying for an aggressive ramp-up, is the key risk to Nykaa’s growth. A possible international foray (no guidance on this from management) could open up new growth avenues, the brokerage firm said.