Analysts at Jefferies believe that Nykaa is a unique combination of growth and profitability.
Nykaa: Brokerage firms are bullish on the shares of ecommerce beauty company FSN E-Co Nykaa. Analysts of global brokerage firm Jefferies estimate that the company’s shares may see a jump of up to 53 percent from today’s low level (Rs 1502). Shares of Nykaa have fallen more than 26% so far this year and are trading at Rs 1,518 per share at the time of writing. Analysts at Jefferies believe that Nykaa is a unique combination of growth and profitability. So far this year, internet stocks have faced weakness not only on Dalal Street but across the globe. However, the brokerage firm has high hopes from Nykaa in the online beauty space.
what is target price
Jefferies has fixed a target price of Rs 1,650 per share for the shares of Nykaa. That is, the brokerage firm expects a rise of about 10 percent in the shares of the company according to today’s low. However, in a bullish scenario, there can be a rally of up to Rs 2,300 in this stock. Under this scenario, analysts have generated 30% CAGR order growth for Nykaa BPC in FY22-26E.
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Nykaa is a brand in itself: Analysts
Analysts believe that Nykaa Unique has a lot of potential for profitability. Jefferies said in the report, “We think it is probably the only vertical BPC e-tailer with a global scale. It is not just a retailer, but a brand in itself.” Analysts further pointed out that Nykaa is one of the most expensive global internet/consumer stocks.
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What do experts say
- Nykaa is focusing on strong unit economics which sets it apart from others. Analysts say, “Since Nykaa earns ad revenue as well as commission from its marketplace offerings (primarily for Nykaa Fashion), the contribution margin is optically high.”
- The company’s asset-light model is also working in its favor. Nykaa requires a manageable working cap of 40 days of sales, mainly because of its inventory-based model in the BPC business. Jefferies expects working capital to remain stable going forward. Analysts further added, “Nayaka’s balance sheet is expected to strengthen.”
(Article: Kshitij Bhargava)
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