The broker sees a long runway of profitable growth for the company. It forecasts a nearly 2.5 times jump in Ebitda margins in the next five years, thanks to growth in private labels, scaling up of the fashion segment, influencer-led growth and operating leverage benefits.
“As the largest specialty beauty and personal care (BPC) retailer in India, a fast-growing market, we believe there is high growth visibility into the interim period for FSN Ecommerce Ventures. We forecast a 38 per cent revenue CAGR for Nykaa’s BPC segment over FY21-26, driven by strong growth in transacting customers,” said UBS in a note.
The broker has a 12-month price target of Rs 2,750 on Nykaa. The counter traded at Rs 2,194, down nearly 2 per cent on Wednesday morning. The stock has already doubled from its issue price of Rs 1,125.
Nykaa is among the few profitable startups that have come with their IPOs in recent months. In the September quarter, the company said its profit plunged about 95 per cent to Rs 1.2 crore but revenue saw a growth of 47 per cent on YoY basis and 8 per cent on sequential basis.
The company said its consolidated GMV (gross merchandise value) grew by 63 per cent year-on-year and 10 per cent sequentially to reach Rs 1,623 crore. Beauty and personal care GMV grew by 38 per cent YoY to reach Rs 1,186 crore and fashion GMV grew by 215 per cent YoY to reach Rs 437 crore.
UBS analysts said they value the BPC segment, which contributes 90 per cent of FY21 revenue, at 20x FY24E EV/Sales (a 30 per cent premium to Indian consumer and internet companies’ average of 15x), given its better growth visibility and competitive advantages in online BPC.
“We value the fashion segment at 10x FY24E EV/Sales, at a premium to ecommerce platforms Amazon (4x), MakeMyTrip (8x), due to its superior growth rate potential. We believe Nykaa’s competitive advantages and growth visibility warrant these multiples,” it said.
