Why Nykaa Share Price is Rising

Share price of Nykaa has shot up in recent sessions following a block deal...

So much so that it had the best one-day performance on the BSE and NSE since listing.

That's right!

Shares of Nykaa's parent FSN E-Commerce Ventures surged as much as 19% to hit a 52-week high on 21 August 2024.

Today, i.e., 26 August 2024, the stock price took a breather and fell 3%.

In fact, in 2024 so far, the stock price is up more than 25%.

Let's understand what's propelling this rally and what lies ahead for the e-commerce company.

Rs 810-Crore Block Deal

Last week on Friday, some of the pre-IPO investors offloaded 1.4% stake in the company worth Rs 8.1 billion (bn).

According to the term sheet issued by JP Morgan and Goldman Sachs, who were the bankers for the sale, Harindarpal Singh Banga and wife Indra Banga had notified about selling 4.09 crore shares at a floor price of Rs 198 apiece.

Harindarpal is a businessman who founded The Caravel Group, a global conglomerate primarily engaged in resources trading, maritime services, and asset management.

As of June 2024, he held a 6.4% stake in FSN E-Commerce. After this recent transaction, his holding is reduced to 5%.

In-Line Quarterly Earnings

While the recent rally may be because of the block deal, shares of Nykaa have been in focus and rising ever since the company posted its quarterly earnings.

Two weeks ago, FSN E-Commerce Ventures reported a net profit of Rs 136 million in the quarter ended June 2024, up 152% from Rs 54 million recorded in the year-ago period.

The company's operating revenue came in at Rs 17.5 bn, up 23% YoY.

Nykaa's gross margins improved across segments, particularly in fashion with a 360 bps improvement year-on-year (YoY).

In an exchange filing, the company said that this performance was relatively slower as its business was impacted by elections as well as heat waves across North India.

During the quarter, the company's physical beauty store network expanded to 200 stores, representing one of the largest networks in India.

While its warehouses increased to 44, servicing 98% of pincodes.

Nykaa also achieved a consolidated GMV of US$400 million during the quarter across four platforms - Nykaa.com, Nykaa Fashion, Nykaa Man, and Superstore.

What Next?

While Nykaa faced seasonal headwinds due to the absence of festival season, impacting its Indian wear sales, the company's management is optimistic about future growth.

The management anticipates a revival in demand during the festive season, which could moderate discounting pressures.

Moreover, the company's recent acquisitions of Dot & Key and Earth Rhythm are expected to strengthen the portfolio of owned brands.

During the quarter, the company increased its stake in Dot & Key, which is a cosmetics company already under its fold.

It held 51% already and now it's acquiring another 39% from promoters of the firm and increase its shareholding to 90% by end of September 2024.

Nykaa is the largest specialty beauty and personal care platform in India in terms of value of products sold and one of the fastest growing fashion platforms in India.

The company the highest average order value (AOV) among leading online beauty and personal care platforms in India.

Going ahead, management has a focus on expanding into the GCC market (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates) with significant growth opportunities.

How Nykaa Share Price has Performed Recently

In the past 5 days, Nykaa share price is up 15%.

In a month, the stock has gained 20%.

Nykaa has a 52-week high of Rs 230 touched on 23 August 2024 and a 52-week low of Rs 132 touched on 28 August 2023.

In 2024 so far, Nykaa is up 28%.

Here's a table comparing Nykaa with its listed peers -

Comparative Analysis

Company	Nykaa	Brainbees	IndiaMart	Net Avenue Tech	Zomato
ROE (%)	3.5	-15.2	17.9	-15.1	1.9
ROCE (%)	12.1	-12.7	24.4	-13.5	1.8
Latest EPS (Rs)	0.1	-8.5	60.8	-0.7	0.7
TTM PE (x)	0	0	47.5	0	385
TTM Price to book (x)	50.8	5.3	9.5	2.8	11.6
Dividend yield (%)	0	0	0.7	0	0
Industry PE	355.3
Industry PB	11.9

Data Source: Ace Equity, Equitymaster

About Nykaa

FSN E-commerce Ventures Ltd. (NYKAA) popularly known as "Nykaa" is a digitally native consumer technology platform, delivering a content-led, lifestyle retail experience to consumers.

The company has a diverse portfolio of beauty, personal care, and fashion products, including owned brand products manufactured by it.

Nykaa offers 296,122 SKUs from 3,118 global and domestic brands primarily across make-up, skincare, haircare, bath and body, fragrance, grooming appliances, personal care, and health and wellness categories.

To know more, check out Nykaa's financial factsheet.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...