Buy FSN E-Commerce Ventures Ltd For Target Rs. 198 By Geojit Financial Services Ltd
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Strong revenue growth; BPC outperformed
FSN E-Commerce Ventures Pvt Ltd (Nykaa) is a consumer technology platform provider that distributes beauty, fitness, healthcare, skincare and haircare products via online and physical stores. It has three operating segments: beauty and personal care (BPC), fashion and others, which include Nykaa Man, Superstore and international business.
* In Q2FY25, Nykaa's revenue grew 24.4% YoY to Rs. 1,875cr, driven by robust performance of the Beauty and Personal Care (BPC) and fashion segments.
* The BPC segment witnessed a 33.2% YoY growth in revenue to Rs. 1,703cr, fuelled by strong performance in categories such as colour cosmetics, skincare, haircare, fragrances and bath and body care. The segment’s gross merchandise value (GMV) grew 29% YoY to Rs. 2,783cr.
* The fashion segment grew 27.3% YoY to Rs. 166cr, driven by substantial growth in the core and emerging categories. The segment’s GMV grew 10% YoY to Rs. 863cr.
* In Q2FY25, total beauty segment orders reached 12.9mn units, reflecting a 24% YoY growth. On the fashion side, however, orders declined to 1.8mn units, marking a 4% YoY decrease.
* EBITDA improved 28.6% YoY to Rs. 104cr, while margin rose 10bps YoY to 5.5%, owing to cost optimisation.
* Reported profit after tax increased 44.7% YoY to Rs. 13cr, driven by robust revenue growth and scale efficiencies.
Valuation
Nykaa delivered a strong earnings performance in Q2FY25. The company expects growth in the BPC and fashion segments going forward on account of ongoing efforts on acquiring new customers, expanding into new categories, and new stores. Additionally, its cost optimization and improving scale efficiency should further boost its profitability in the long-term. Expansion through partnership with globally recognized brands, investment in technology and synergies are likely to positively impact its earnings in the long term. Therefore, we reiterate our BUY rating on the stock, with a revised target price of Rs. 198, based on 5.7x FY26E P/S.
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SEBI Registration Number: INH20000034
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