Nykaa Share Price Today: Nykaa’s stock fell nearly three percent on Monday after Macquarie initiated coverage on the cosmetics-to-fashion retailer with an ‘underperform’ rating, citing risks to the company’s beauty segment margins. The brokerage has set a target price of Rs 115, indicating an downside risk of 22% from the current market price of Rs 147.8 per share.
Macquarie’s target price for Nykaa is the lowest among brokerages covering the stock. The brokerage firm has a bear case target for Nykaa at Rs 70, which is half the price from current levels.
According to Trendline data, the average target of FSN E-Commerce Ventures Ltd. is ₹145.00. The Consensus Estimate represents a fall of 1.56 percent (negative) from the previous price of ₹147.30.
According to the brokerage, the beauty retailer faces risks to its beauty unit margins as growth is driven in smaller towns, which are mostly offline, and as such faces competition threats.
Macquarie said that in the nascent fashion segment, experience from physical retail alerts the brokerage to the company’s proprietary brand focus and curation-led positioning.
“There is a need to increase investment in Nykaa Beauty. Lower margins in mom-and-pop store servicing opportunities. It has a limited operating history, and the need for growth investment alerts us,” Macquarie said.
The note added, “With large D2C brands increasingly looking to go offline and customers demanding more physical stores to experience the products, we believe Nykaa has the leveraged advantage to sustain growth.” Will need to re-invest.”
The brokerage said entry of new players such as Reliance Retail (Tira) and Tata Cliq could add to the woes for Nykaa at a time when competition in the segment is already tough.
“We remain concerned about Nykaa’s ability to grow profitably in the fashion segment, where the company offers a curated marketplace of third party/newly developed own apparel brands,” the brokerage note said.
As the research notes, “Analysis of offline retailers indicates that players using a curation-based approach with third-party brands have had limited success.”
The brokerage also sees a tough road to profitability with Nykaa entering the business of serving smaller mom-and-pop stores, and therefore competing with a well-oiled delivery network with much lower margins.
“There is a need to increase investment in Nykaa Beauty. Lower margins in mom-and-pop store servicing opportunities. It has a limited operating history, and the need for development investment alerts us,” it said.
Shares of Nykaa have lost over 34 per cent of their value in the last one year, a period in which the Sensex has gained 14 per cent.
Nykaa is a Mumbai-headquartered beauty and fashion e-commerce company, founded in 2012 by Falguni Nair. The company offers a well-curated comprehensive selection of Makeup, Skincare, Haircare, Bath & Body, Fragrance, Grooming Appliances, Personal Care and Health. and welfare categories.
Disclaimer:Disclaimer: The views and investment tips given by the experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decision.
read all latest business news Here
