HDFC Securities noted that Nykaa's 33% YoY growth in revenue to ₹1,468.5 missed its expectations of ₹1505 crore on account of fewer festive days in Q3FY23.
The Nykaa Analyst: Analysts at HDFC Securities led by Jay Gandhi downgraded the stock's rating to ‘sell' from ‘reduce' with a revised target price of ₹125 cut from the earlier ₹130. A 16% downside from the company’s last closing price of ₹149.65.
The Nykaa Thesis: HDFC Securities noted that the company's Beauty and Personal Care and Fashion segments missed the net sales value expectations despite registering double digits growth in orders.
The growth in orders was backed by an improvement in order conversions rate that rose for both BPC (from 3% to 3.8%) and fashion (from 2.4% to 3.6%) over the nine months period.
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The brokerage firm noted that this combined with the omnichannel retailer reducing split shipments helped in improving operational efficiencies in marketing and fulfilment, especially in the BPC segment.
However, analysts highlighted that the benefits of operational efficiencies were mitigated by higher discounts offered in the fashion segments among other factors. This led to the beauty and fashion retailer's EBITDA margin contracting 94 basis points YoY to 5.3% missing the brokerage firm's estimates.
The firm cut its EBITDA estimates for FY24/25 by 8% each to account for higher gestation in fashion/B2B business.
Price Action: Shares of Nykaa plunged 4.94% to ₹142.25 on Tuesday afternoon.
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