Why Nykaa Share Price is Rising

New-age internet stocks have been in an uptrend these days.

Despite trading below their initial issue prices, these stocks have managed to bottom out after the sell-off heat.

Many of these technology companies went public in 2021 at historically high valuations. However, in the subsequent market correction, these stocks dipped below their IPO prices.

In recent times, there has been a notable resurgence in the share prices of these new-age internet stocks. This upward movement is attributed to improved profitability reported by these companies in recent quarters.

One such new-age tech stock is Nykaa. Shares of Nykaa have seen a notable 19% upswing within two weeks.

Here is what's contributing to the momentum.

#1 Dermo-Cosmetic Expansion

The recent rally could be attributed to Nykaa's expansion of its dermo-cosmetic portfolio.

The addition of CeraVe on 21 November 2023, a well-regarded dermatologist-recommended brand in the US, underscores Nykaa's commitment to becoming a prime destination for dermo-cosmetic brands.

This strategic move aims to provide Indian health seekers with a comprehensive platform offering expert solutions, dermatological consultations, and easy access to dermatologist-recommended products.

Nykaa's dermo-cosmetic portfolio, which now includes 25 renowned brands like Cetaphil, Sebamed, Neutrogena, Bioderma, Isdin, and Aveeno, has experienced significant growth on the platform.

#2 Robust Q2 Results

Another reason why Nykaa shares are buzzing these days is because it posted strong Q2FY24 earnings on 6 November 2023.

While the company's Beauty and Personal Care (BPC) business displayed moderate growth, the market has responded positively due to a resurgence in the Nykaa Fashion segment.

In the quarter under review, the revenue from operations surged by 22% to Rs 15.1 billion (bn) compared to Rs 12.3 bn a year ago. Nykaa highlighted that this revenue increase occurred despite a delayed festive season compared to the previous year.

For the quarter, the company reported a net profit of Rs 78 million (m), marking a significant 50% rise from the same period in the previous year.

Notably, the fashion business played a pivotal role in driving this growth, experiencing strong demand throughout the quarter.

Nykaa's Beauty and Personal Care unit witnessed robust demand during its flagship sales event in July, contributing positively to the overall financial performance.

The festive season holds particular importance for e-commerce companies like Nykaa, and this year's sales, although delayed, have added to the company's success.

An improvement in the company's earnings before interest, taxes, depreciation, and amortization (EBITDA) margin was also observed, rising from 5% in Q2FY23 to 5.4% in Q2FY24. This positive margin trend reflects enhanced operational efficiency during the specified quarter.

What Next?

The future looks promising for Nykaa, with the Indian beauty market anticipated to achieve a Compound Annual Growth Rate (CAGR) of 12.5% from 2022 to 2027.

This growth is fuelled by factors such as increasing disposable incomes, a rising urban population, and a heightened awareness of beauty and personal care products. Nykaa is poised to benefit significantly from this positive market trend.

Moving ahead, the incorporation of more international brands is poised to contribute to the company's expansion. This strategic move aligns with Nykaa's growth trajectory, tapping into the global market to enhance its product offerings and reach a wider audience.

Furthermore, Nykaa is set to mark a significant milestone in its international expansion strategy by inaugurating its first store in the Gulf Cooperation Council (GCC) region during FY24.

How Nykaa Shares have Performed Recently

Nykaa shares have gained 24% in the last one month and more than 11% in 2023 so far.

The company touched its 52-week high of Rs 187 on 21 November 2022 and its 52-week low of Rs 114 on 26 April 2023.

About Nykaa

Nykaa is India's largest online beauty and cosmetics retailer.

Falguni Nayar founded the company in 2012. The company has a portfolio of beauty, personal care, and fashion products, including its owned brand products and international products.

It retails over 2,000 brands and 200,000 products across its platforms.

It launched physical stores in 2014. In 2020, it became the first Indian unicorn startup headed by a woman.

To learn more about the company check out, Nykaa's financial factsheet and quarterly results.

You can also look at Nykaa 2021-22 annual report analysis.

For more details about the company, you can have a look at these articles:

Nykaa vs Zomato

Nykaa vs Pace ecommerce

Nykaa vs Indiamart Intermesh

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