FSN E-commerce shares fall 2.5% despite strong Q2 revenue growth

Shares of FSN E-commerce, Nykaa’s parent company, fell by 2.5% on October 8 despite strong business performance in the July-September quarter. Investors can buy shares online as FSN continues to show promising growth, especially in its beauty and fashion segments.

Beauty segment drives mid-twenties growth

Nykaa’s beauty division achieved significant growth, with net revenue and net sales value (NSV) both increasing in the mid-twenties on a year-on-year basis. The company's gross merchandise value (GMV) growth outpaced revenue growth. This performance was fueled by strong results across omnichannel retail, owned brands, and e-B2B distribution just ahead of the festive season. Dot & Key, a skincare brand in which Nykaa holds a 90% stake, maintained its upward growth trajectory, further strengthening the segment’s performance.

The fashion segment shows steady progress

Nykaa’s fashion vertical reported early teen growth in NSV, while the overall revenue for this segment increased by the early twenties. The company's content platform, LBB, also contributed significantly to the fashion division’s growth. FSN E-commerce expects its fashion segment to maintain similar momentum in the long term as the festive and wedding seasons boost demand. While demand remained soft in the first half of the financial year, it is projected to revive in the second half, aided by rising consumer spending during key periods.

Brokerages' mixed outlook on Nykaa

Brokerage firm Nomura has a 'neutral' rating on FSN E-commerce’s stock, with a target price of ₹203. It highlights the beauty and personal care segment as the driving force behind the company’s recovery and continued growth. On the other hand, Citi remains cautious, maintaining its 'sell' rating on Nykaa with a price target of ₹165. Despite forecasting a 25% year-on-year revenue growth for the company, Citi predicts EBITDA growth of 47%, driven by expanding margins, but still advises caution.

Key takeaways

• Shares of FSN E-commerce fell 2.5% despite strong Q2 performance.
• Nykaa’s beauty segment recorded mid-twenties revenue growth, driven by omnichannel retail and owned brands.
• The fashion vertical experienced early teen NSV growth, supported by the content platform LBB.
• Nomura remains neutral on the stock, while Citi maintains a cautious outlook.
• Investors can buy shares online as FSN E-commerce shows promising long-term growth, particularly during the festive season.

As Nykaa continues to expand, investors can consider the potential upside, with opportunities to buy shares online as the market adapts to consumer trends.