Citi says buy Nykaa as it backs company to nail lifestyle retail opportunity

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

Choose Stock Exchange: BSE LIVE NSE LIVE

26 Aug, 2025 12:21

Volume

Todays L/H

More

×

Brokerage firm Citigroup India has initiated coverage on shares of FSN E-Commerce Ventures, operator of Nykaa, with a “buy” rating and a price target of Rs 1,620, implying 16 percent upside from the current level.

The brokerage firm believes that the company has strong unit economics in its core beauty and personal care (BPC) segment to create a robust platform to leapfrog into the wider lifestyle retail opportunity.

“We believe brand recognition + business model holistically target Nykaa's core TAM (Beauty & Personal Care), giving it durable competitive advantages,” Citi said in a note. The brokerage firm believes that the total addressable market for Nykaa is “attractive” as it sees the BPC market growing to $5 billion by 2025-26 from $1.2 billion in 2020-21.

Citi’s optimism for the company comes amidst a steep sell-off in Nykaa’s stock so far this year. Nykaa’s stock is down 34 percent in 2022 so far as prospects of higher interest rates in the US led to steep compression of valuations. Higher interest rates tend to reduce the net present value of future profits of a company.

Citi expects Nykaa to retain its 35 percent market share in the BPC market over the next 5-10 years. Further, the brokerage firm has high hopes of the fashion vertical where it sees Nykaa capturing 9 percent market share in online fashion by 2030-31.

“Nykaa's market leadership in specialty BPC enables the company to foster strong brand affinity among customers, enhancing its attractiveness for brands to partner with it,” Citi said. The brokerage firm expects Nykaa’s revenues to grow 36 percent annually over the next five years driven by the BPC and online fashion business.

Citi expects the overall gross margin of Nykaa to rise 400 basis points to 43 percent by 2025-26 owing to a shift in revenue mix and ad sales.

“Our target price implies nearly 100% premium to the higher-end of global e-commerce peers’ current valuations, but in line with three-four years’ average valuations for some of the high-growth EM e-commerce platforms,” Citi said.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.