Elara Capital maintains 'Accumulate' rating on FSN E-Commerce, sets target price of Rs 190

Currently, Nykaa holds 30 percent of India's online BPC market

FSN E-Commerce Ventures' Online Beauty and Personal Care (BPC) segment is projected to achieve a Gross Merchandise Value (GMV) Compound Annual Growth Rate (CAGR) of about 25-27 percent from FY24 to FY27, according to a research report by Elara Capital.

Based on this forecast, the brokerage firm maintained its 'Accumulate' rating and target price of Rs 190 on FSN E-Commerce, suggesting a 12 percent increase from its current market price. On June 14, FSN E-Commerce shares closed 2% higher at Rs 170.

Elara analysts anticipate Nykaa's sustained growth, driven by its efforts to maintain a steady market share despite intensified competition. Key growth drivers include the expansion of popular private labels such as Dot & Key and Kay Beauty, a strategic focus on premiumisation, an expanding base of transacting customers, and portfolio growth in the personal care segment.

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While forecasting stable EBITDA margins for Nykaa's online Beauty and Personal Care (BPC) segment, Elara highlights that any potential gains from improved take rates and advertising revenue could be balanced by escalating expenses on advertising and promotions. Currently commanding 30 percent of India's online BPC market, Nykaa is aggressively pursuing strategies to streamline operations, notably through accelerated delivery services in BPC, aiming to significantly enhance the consumer experience and yield substantial medium-term benefits, according to Elara's analysis.

Elara noted that some key factors for a potential upgrade in the stock include sustained revenue growth and profitability in BPC despite competition from quick commerce, as well as improved profitability in the Fashion segment.

Nykaa expects that the GMV of its superstore business will expand ninefold from FY24 levels in the medium term. This growth trajectory is expected to be supported by factors such as achieving a strong product-market fit, introducing a personalised app for retail partners, and enhancing order quality. The company also foresees a reduction in losses in this segment in the near-to-medium term.

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