Hold FSN E-Commerce Ventures: target of Rs 175: ICICI Securities

ICICI Securities recommended hold rating on FSN E-Commerce Ventures with a target price of Rs 175 in its research report dated May 23, 2024.

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June 03, 2024 / 13:38 IST

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ICICI Securities's research report on FSN E-Commerce Ventures

Nykaa grew BPC GMV 30% YoY in Q4FY24 aided by ‘Pink Love Sale’. As a result, BPC gross margin declined by 150bps YoY. Advertisement expenses grew 110bps YoY, indicating renewed investments in the core category. Management highlighted that the B2B e-commerce segment has reduced losses despite rapid scale-up (+90% YoY growth in Q4FY24). Management is also bullish on its expansion in GCC, ‘Nysaa’ and called out that capex cost had peaked in FY23. While the revenue growth trajectory is improving, ad revenue growth (as a proportion of GMV) remains muted.Also, increasing competitive intensity from other channels/players and its potential impact on margin remains unclear at this point. We downgrade to HOLD on margin concerns and maintain our DCF based TP of INR 175.

Outlook

We downgrade to HOLD (from ADD) on the stock maintaining our DCF-based target price of INR 175. Key risks: on the downside: (1) chasing growth at elevated levels can be dilutive of gross margin, (2) success in fashion business can be difficult given higher- competition in the category. On the upside: (1) Competition in the e-BPC space further weakens.

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