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Nykaa’s Share Soars 5.21% Amidst Strong Q3FY25 Performance: Beauty Segment Fuels Growth and Future Optimism

February 10, 2025
Smart Money

Nykaa Shares Surge Following Strong Q3 Business Update

January 6, 2025 – Shares of Nykaa, the prominent e-commerce platform owned by FSN E-Commerce Ventures, saw a notable increase in trading activity on Monday, with the stock price climbing by 5.21% to reach an intraday high of Rs 176.50 per share. This rise in share price is attributed to a robust business update for the December quarter (Q3FY25), which exceeded market expectations.

Healthy Revenue Growth Reported

Nykaa’s latest quarterly performance showcased impressive numbers, with consolidated net revenue growth anticipated to exceed mid-twenties percentage, representing a significant improvement over the company’s gross merchandise value (GMV) growth. This indicates a better conversion rate from GMV to net revenue, a positive sign for investors and stakeholders.

In the beauty segment, a key area of Nykaa’s business, the company reported accelerated growth. Net revenue in this vertical is expected to surpass the mid-twenties growth threshold, while GMV growth is projected to be in the low-thirties. This performance is indicative of strong consumer demand across Nykaa’s diverse offerings, which include its e-commerce platform, physical retail outlets, proprietary brands, and eB2B distribution channels.

Customer acquisition remains a focus for Nykaa, with its eB2B platform, Superstore by Nykaa, experiencing rapid growth. Currently, this platform contributes 8% to the beauty vertical’s GMV, up from 7% a year earlier, and serves approximately 260,000 retailers across more than 1,100 cities.

Fashion Segment and Future Outlook

In tandem with the positive developments in beauty, Nykaa’s fashion segment showed net revenue growth of around 20%, while net sales value growth is projected to be in the low to mid-teens. This steady performance reflects ongoing improvements in content creation, marketing efforts, and service-related income streams. However, Nykaa acknowledges that online fashion demand remains subdued, though the company is optimistic about long-term growth prospects in this vertical.

Analysts from JM Financial noted that the Q3FY25 revenue update indicates strong market positioning for Nykaa in the Beauty and Personal Care (BPC) sector, estimating year-on-year growth in the low-thirties percentage range. In contrast, the fashion segment, while experiencing muted growth in net sales value, has likely resulted in a market share increase for Nykaa amidst a challenging online fashion landscape.

Analyst Predictions and Market Performance

In light of these developments, analysts have revised their forecasts, adjusting expectations for lower growth in the fashion segment while considering a sustained lower GMV-to-revenue conversion in the BPC sector. Nevertheless, Nykaa remains a top recommendation in the internet retail space, with analysts maintaining a target price of Rs 240 for March 2026, which implies a potential upside of 43%.

As of 12:25 PM on January 6, 2025, Nykaa’s shares were trading at Rs 175.10, reflecting a 4.38% increase, while the broader market, represented by the BSE Sensex, was trading 1.17% lower at 78,299.66 points.

About Nykaa

Founded in 2012 by Falguni Nayar, Nykaa has emerged as a leading Indian e-commerce platform specializing in beauty, wellness, and fashion products. Headquartered in Mumbai, the company has become a preferred shopping destination for consumers with its extensive product range that includes makeup, skincare, haircare, fragrances, grooming tools, and health and wellness products.

In addition to its wide array of products, Nykaa enriches its customer experience through unique services such as a beauty and makeup blog, an expert advice portal, a virtual makeover tool, and a dedicated beauty helpline. Customers can access Nykaa’s offerings through its customer-friendly website, mobile application, and an expanding network of over 100 retail locations across India.

As of now, Nykaa holds a market capitalization of Rs 50,061.16 crore, placing it firmly within the BSE 200 category. The impressive business performance and positive market reception indicate Nykaa’s resilience and growth potential in the competitive e-commerce landscape.