BofA projects 12% downside for Nykaa on slower margin growth

FSN E-Commerce Ventures Ltd (Nykaa)

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26 Aug, 2025 12:21

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Bank of America (BofA) has downgraded Nykaa to 'Underperform' from Neutral, cutting its target price to Rs 150 from Rs 225 to account for a slower-than-expected pace of margin improvement and muted traction in the quick commerce segment. The new target price suggests a potential downside of nearly 12 percent from the stock's current market price.

At 9:30 AM, shares of FSN E-Commerce Ventures, the parent company of Nykaa, were trading 1.4 percent lower at Rs 167. The stock has dropped slightly over 1 percent on a year-to-date basis, underperforming the Nifty 50, which has risen 7.5 percent during the same period. In November alone, the stock declined by 5 percent, following declines of 6 percent in September and 7 percent in October.

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BofA expects quick commerce uptake in urban areas to weigh on Nykaa's revenue growth, which will be further impacted by subdued near-term growth in the apparel industry. The brokerage said that the entry of global players like Shein is expected to heighten competition, adding to Nykaa's challenges.

Additionally, BofA believes the beauty and personal care (BPC) segment's margin improvement may lag behind market expectations, further dampening the company's outlook.

Also Read | Nykaa Q2 net profit jumps 72% to Rs 10 crore on strong revenue growth, but misses Street estimate

Nykaa's Q2 FY25 net profit surged 72 percent year-on-year to Rs 10 crore, driven by robust revenue growth in its beauty and fashion segments. However, the profit sharply missed Street expectations, with analysts polled by IBES estimating it at Rs 28.7 crore for the quarter. Revenue from operations rose 24 percent year-on-year to Rs 1,875 crore in the July-September quarter, supported by a 24 percent increase in gross merchandise value (GMV) to Rs 3,652.5 crore.

Nykaa's EBITDA rose 29 percent year-on-year to Rs 103.7 crore, with the EBITDA margin inching up to 5.5 percent, an improvement of 18 basis points.

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