A new-age stock’s share price zoomed 5 percent on Wednesday to reach an intraday high of ₹ 144.50 apiece on the National Stock Exchange (NSE), after a brokerage gave a target on its shares with an upside of 47 percent.
JM Financial believes that Fsn E-Commerce Ventures Ltd (Nykaa) is a strong player in India’s secular beauty and personal care (BPC) growth. It has maintained its bullish view on Nykaa shares after it conducted a survey, the results of which suggest encouraging trends in beauty spending as well as a move towards online shopping across categories.
In its report, the brokerage said that assortment is one of the key reasons for shopping online and Nykaa has over 3,400 brand partners and is being used by 142 of 203 survey participants. It said that 30 percent of the participants buy more than 50 percent of their BPC products on Nykaa.
27 percent of the participants belonged to the 33-37 age group and they account for 39 percent of the shoppers spending over ₹ 10,000 on BPC annually with over 90 percent online penetration. Users in this age group suggested higher dispensable income and early signs of ageing are the primary reasons for their increased BPC spending from a few years ago.
The report stated that 80 percent of its users have an average order value of more than ₹ 1,000 compared to only 32 percent of non-Nykaa users.
Moreover, Nykaa’s owned brands have also garnered consumer affinity.More than 45 percent of its users also use Nykaa Fashion, primarily due to premium selection and latest season designs and would be more likely to shop if it was available on the main app, according to the report.
With a market capitalization of ₹ 39, 367 crores, Nykaa is a mid-cap company. It has a low return on equity of 4.88 percent and an ideal debt-to-equity ratio of 0.58. Its shares were trading at a price-to-earnings ratio (P/E) of 2300, which is significantly higher than the industry P/E of 128.66, indicating that the stock might be overvalued as compared to its peers.
The company’s promoters hold a 52.28 percent stake in it, followed by retail investors with 26.43 percent, foreign institutions with 10.04 percent, mutual funds with 8.50 percent and other domestic institutions with 2.75 percent.
Brokerage Firm JM Financial sees a 47 percent upside in the share price of the company in the next twelve months. It has reiterated a buy rating on the stock with a target price of ₹ 210 per share, compared to its current share price of ₹ 142.75 apiece.
Written by Simran Bafna
