Nykaa shares drop 5% on weak Q3 results

Shares of FSN E-Commerce Ventures Ltd, the parent company of Nykaa, fell as much as 5.4% to hit an intraday low of ₹141.45 apiece on the Bombay Stock Exchange (BSE) after the company reported a 68% year-on-year (YoY) decline in its net profit at ₹9.2 crore for the October-December quarter.

On Tuesday, shares of Nykaa opened lower at ₹143.05 on the BSE as against the closing price of the previous session at ₹149.65. At 2:45 pm, the share price of the beauty e-commerce company was trading lower by 5.11% at ₹142 on the Bombay Stock Exchange. During the session on Tuesday, the company’s market capitalisation stood at ₹40,503 crore with 7,76,867 shares exchanging hands on the BSE against the two-week average of 7.62 lakh shares. The stock is trading 61.70% down from its listing day price and has fallen 35.45% in the six-month period. The company hit a 52-week high of ₹315.86 on April 11 last year, whereas it hit a 52-week low of ₹120.75 on January 23, this year.

In the December quarter for FY23, the company’s revenue from operations was up 33% to ₹1,462 crore from ₹1,098 crore in the year-ago period. The expenses surged 36% YoY to ₹1,455 crore in the October-December quarter as compared to ₹1,067 crore in the year-ago period. The Falguni Nayar-led company’s GMV surged 37% YoY to ₹2,796 crore, while revenue from operations grew 33% YoY in the quarter. Gross profit grew 25% YoY to ₹634.7 crore in Q3 FY2023. EBITDA grew 13% YoY to ₹78.2 crore and EBITDA margins came in at 5.3%.

Brokerage Jefferies had last week slashed the target price of Nykaa stock from ₹275 to ₹200 owing to a slump in urban consumption. Following the December quarter results, the brokerage firm has maintained a 'buy' rating for the stock. 

Goldman Sachs has maintained a 'neutral' rating for the company with a target price of ₹200 per share. The brokerage said the beauty e-commerce brand missed the Q3 estimates and it doesn’t see the company picking up its pace in beauty and personal care growth in the near term. Brokerage firm Kotak Institutional Equities has revised the target price of the company’s stocks to ₹215 from the previous ₹230 while maintaining a 'buy' rating. 

Nykaa shares have witnessed a surge in selling activities after the lock-in period for pre-IPO investors ended on November 10, 2022. Following the expiry of the lock-in period, private equity firm Lighthouse India, TPG Capital, Narotam Sekhsaria, and Mala Gaonkar offloaded their stake in the company through block deals, while Morgan Stanley, Aberdeen Standard Asia Focus, Canada Pension Plan Investment Board, and Norges Bank bought shares in the company.