Nykaa shares rise over 5% on stellar Q2 performance

Nykaa shares saw a significant jump of over 5% in early trade on Wednesday, 13 November, after reporting strong second-quarter results for FY25. FSN E-Commerce Ventures, which operates the beauty and fashion retail platform, posted impressive financial growth, sparking investor interest in the stock.

Nykaa posts 72% rise in net profit

Nykaa reported a 72% year-on-year (YoY) increase in net profit, amounting to ₹10.04 crore for the quarter ending September 2024. The company’s revenue from operations also grew by 24% YoY to ₹1,874.74 crore, compared to ₹1,507.02 crore during the same period last year.

• Beauty segment performance: Revenue increased 24% YoY to ₹1,703 crore.
• Fashion segment performance: Revenue rose by 22% YoY to ₹166 crore.

GMV growth drives revenue expansion

The company’s gross merchandise value (GMV) for Q2FY25 rose 24% YoY to ₹3,652 crore, with notable growth in both the beauty and fashion segments:

• Beauty GMV: Up by 29% YoY to ₹2,783 crore.
• Fashion GMV: Increased by 10% YoY to ₹863 crore.

Industry analysts believe the festive and wedding season will further boost growth in the second half of FY25.

Brokerages take a cautious stance

While Nykaa’s financial performance impressed, brokerages expressed mixed sentiments. Industry analysts highlighted that elevated marketing expenses and rising costs could constrain profitability improvements.

Recommendations for buying shares online

Nykaa’s promising financial results have gained attention from brokerages, leading to varied recommendations for investors considering opportunities to buy shares online: 

• Rating: Buy, with a revised target price of ₹205 per share (down from ₹220).
• Expectations: Moderated profit estimates for FY25-FY27, citing operational expenses.

Concerns over competition

Some analysts raised concerns about quick commerce platforms expanding their product range, which could pressure Nykaa's fulfilment costs.

• EBITDA estimates: Reduced by 6-9% for FY25-FY27 due to higher marketing and sales expenses.
• Rating: Sell, with a revised target price of ₹170 per share (down from ₹190).

Nykaa shares trade higher

At 9:40 AM, Nykaa shares were trading 0.82% higher at ₹179.10 apiece on the BSE, reflecting steady investor interest despite mixed brokerage views.

Key takeaways

• Nykaa’s Q2FY25 net profit surged 72% YoY, with a 24% revenue boost.
• Strong GMV growth indicates healthy demand across beauty and fashion segments.
• Analysts suggest buying shares online for long-term gains but advise caution over rising expenses and competition.