Why Brokerages Expect A 30% Upside For Nykaa

Brokerages are bullish on e-commerce firm Nykaa due to its growing beauty and personal care (BPC) business.

What Happened: Global research firms Jefferies and Morgan Stanley are bullish on Nykaa, seeing an upside of 30% and 17%, respectively, from the previous day's closing price as its BPC business could power growth for the company.

Jefferies had a "buy" call on the stock with a target price of ₹220. The brokerage said BPC offers significant headroom for growth as increasing user awareness should drive the category growth. Jefferies sees a clear need among customers who are value-conscious and no just discount seekers as the fashion segment plays in a niche premium market.

Despite tagging the BPC business as growth driver, the research firm sees its margins being range bound in the short term as growth takes priority.

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Morgan Stanley had an “overweight” call with a target price of ₹198. The newer personal category items like serums and sunscreens are growing at 100% and home brands at peak could contribute 15%-20% of the gross merchandise value.

However, the competition among beauty brands remains high. The quick-commerce business arm would not be able to keep as much inventory and the company is working on reducing its delivery times, said Morgan Stanley. 

Price Action: Shares of Nykaa rose 0.79% to ₹170.55 on Thursday morning session.

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