Nykaa's FY30 ambitions look lofty, says HDFC Securities; flags risks to beauty, fashion growth targets

HDFC Securities Institutional Equities (HSIE) has retained a bearish stance on Nykaa, arguing that the beauty and fashion retailer's ambitious FY30 growth targets may be difficult to achieve as key growth tailwinds moderate and competition intensifies.

In a note following Nykaa's FY26 analyst meet, HSIE said management's targets across beauty and fashion appear "lofty", particularly given the scale of customer acquisition and profitability improvements required over the next four years.

"Management intends to more than double its BPC cumulative customer base (CCB; from 45mn to ~100mn over FY26-30)," the brokerage noted, adding that the company is targeting beauty and personal care (BPC) gross merchandise value (GMV) growth of 25-30% CAGR through FY30.

HSIE, however, believes some of the drivers that supported Nykaa's growth over FY24-26 may not be available in the same magnitude going forward.

The brokerage pointed out that House of Nykaa's beauty business grew at nearly 60% CAGR over FY24-26, while its eB2B business expanded at 41% CAGR during the same period. "We suspect unless there is another successful acquisition like Dot & Key, HoN growth is likely to moderate (base effect)," it said.

According to HSIE, the assumption that Nykaa's core beauty business can accelerate beyond its FY24-26 growth rate despite a higher base "seems like a stretch."

Fashion targets face tougher test

The brokerage was even more cautious on the fashion business, where management has outlined a 3-3.5x expansion in net sales value (NSV) by FY30 and aims to achieve high-single-digit EBITDA margins.

"The 32-37% CAGR in NSV pencilled in by management... seems lofty," HSIE said, arguing that key operating metrics such as purchase frequency and average order values already appear largely optimised.

The brokerage also questioned whether Nykaa can continue adding customers at over 30% CAGR while simultaneously delivering meaningful margin expansion.

"Adding customers at 30%+ CAGR over FY26-30 while achieving high-single-digit margin by FY30 would be a first," it said.

Competition rising, execution key

While acknowledging Nykaa's strengths in the beauty segment, HSIE said the competitive landscape is evolving.

"While Nykaa remains an efficient online business, especially in the BPC segment, its success in part is due to the absence of potent competitors (a fact that is gradually changing)," the brokerage said.

HSIE expects Nykaa's beauty and fashion businesses to grow at a slower pace than management's targets and said customer acquisition costs and retention will remain key variables to watch as the company pursues its long-term growth ambitions.

Shares of Nykaa fell 0.27% to an intraday low of ₹303.50 apiece on the NSE on Tuesday. The stock has surged nearly 50% in the past year, outperforming the Nifty Midcap 50 index that has risen over 7% during the same period.