Target: ₹195

CMP: ₹175.10

FSN E-Commerce Ventures (Nykaa) is set to see its online Beauty and Personal Care (BPC) segment posting a gross merchandise value (GMV) CAGR of about 25-27 per cent in FY24-27. This may be led by: stable market share despite increased competition, better growth in private labels like Dot & Key and Kay Beauty (owned brands’ GMV CAGR at 47 per cent in FY21-243) premiumization play – Luxe forms 15-20 per cent of Nykaa’s BPC GMV, rising number of transacting customers and healthy growth in the personal care portfolio (skin and hair care).

We up FY25/26/27 revenue growth estimates 4/6.2/10 per cent due to better revenue growth in Fashion/Superstore segments. But we pare FY25/26 EBITDA estimate 4.3/3.6 per cent as the benefit from breakeven in Fashion may be largely offset by negative impact from stable margin in BPC (earlier an 80bps rise in BPC margin assumed in FY25E27). BPC is trading at one-year forward EV/EBITDA and P/E of 38x and 67x, which may move up to 45x and 75x, respectively which could take the BPC valuation to ₹47,000 crore (₹164 a share).

We value the Fashion business at 6x (from 4x) one-year forward EV/sales due to a clear path to profitability (EBITDA break-even by FY26). This could take the valuation for the Fashion business to ₹6,800 crore (₹24 a share).