Nykaa slips 3%, hits new low on heavy volumes; down for 5th straight day

Shares of FSN E-commerce Ventures, the parent company of Nykaa, hit a new low of Rs 115.45, down 3 per cent on the National Stock Exchange (NSE) in Tuesday's intra-day trade, amid heavy volumes. The stock of the beauty e-retailer traded lower for the fifth straight day, down 8 per cent during the period. In comparison, the Nifty 50 was up 0.27 per cent at 17,791 at 02:13 PM. Average trading volumes on the counter nearly doubled with a combined around 11 million equity shares having changed hands on the NSE and BSE so far in trade. In the past six months, the stock has slipped nearly 40 per cent, as compared to 0.8 per cent rise in the Nifty 50. Further, in the past one year, it has more-than-halved, tanking 58 per cent, as against 5 per cent gain in the benchmark index. Nykaa is India's biggest online marketplace for beauty, personal care and fashion brands. The company made stock market debut on November 10, 2021. The stock has been under pressure over the past couple of months after media reports suggested that five executives at Nykaa had resigned, amid intensifying competition and a fall in stock price. On Monday, however, Nykaa, announced that Rajesh Uppalapati has joined as the Chief Technology Officer of the company. Abhishek Awasthi, Eswar Perla, Dhruv Mathur and Amit Kulshrestha, meanwhile, have joined the existing technology leadership team. "With a collective experience of over 60 years between them across organizations such as Walmart, Amazon, Magicpin, and LBB, they take on key roles in product and engineering, helping to drive innovation and growth across the company's digital platforms," the company said in a press release. The new leaders will join existing leadership, now comprising over 50 leaders, and will be instrumental in driving the company's growth agenda forward. Each leader has been carefully selected for their maturity, wealth of experience, industry expertise, and passion for innovation and growth, Nykaa said. Meanwhile, January-March quarter (Q4) has been historically a weak quarter for Nykaa. Q4FY23 also experienced online consumption fatigue. According to analysts at ICICI Securities, the management's decision to activate a new sale event in Q4FY23E was to counter these headwinds. "Overall, we estimate revenue growth of 31.3 per cent YoY in Q4FY23. We believe cost control measures are likely to aid Ebitda margin expansion of 120bps YoY (flat QoQ). We estimate Ebitda to grow 73 per cent YoY and PAT to grow 4 per cent YoY," the brokerage firm said in a Internet sector report. Though we are expecting a sequential decline due to the seasonally high Q3 festive quarter, we expect Nykaa's gross merchandise value (GMV) to grow 35 per cent YoY with growth driven by Pink Love Sale in February, said analysts at JM Financial Institutional Securities. "Nykaa beauty and personal care (BPC) is again expected to stay strong with an inelastic customer base not impacted by decline in discretionary spending but these headwinds could challenge growth in Fashion segment," the brokerage firm said. “We expect BPC GMV to grow 30 per cent YoY driven by robust AOVs and better customer coversions while Fashion is expected to deliver 29 per cent YoY growth on a smaller base. Overall, we anticipate Nykaa to deliver 35 per cent/32 per cent YoY growth in GMV/Revenue. With a company-wide lowering of fulfilment costs from regional centres and business mix shifting towards higher margin BPC, we expect overall EBITDA margin to improve 10bps sequentially and 148bps YoY,” analysts said. Considering the exit of Vikas Gupta, who was brought in to lead eB2B, we suggest a wait and watch mode for this segment. We forecast the company to deliver GMV/Revenue/EBITDA CAGR of 33 per cent/33 per cent/68 per cent over FY23-26E period, the brokerage firm said.