HDFC Securities' research report on Fsn E-commerce Ventures (Nykaa)
Nykaa’s Q4 top line grew 33.7% YoY to INR13.02bn (in-line) in Q4FY23. BPC growth continues to moderate (30% YoY in Q4; 32.5% in FY23 vs 45% CAGR over FY19-22). BPC AUTC (25% YoY in FY23 vs 32% CAGR clocked over FY19-22.) continues to moderate and FY23 was largely about improving the quality of the customer base and efficiency in BPC. The fashion foray remains unconvincing (fashion AUTC growth lags order growth). PBT margins remained flat YoY in Q4 (HSIE: 2.3%) due to (1) higher tech-related employee expenses, (2) higher S&D, employee & SG&A expenses due to offline and eB2B expansion, and (3) higher distribution expansionled depreciation. These more than offsetting gains at the contribution level. Our thesis remained on track in FY23 as (1) BPC AUTC continues to moderate, and (2) ad income as % of revenue dropped ~100bps YoY (HSIE).
Outlook
We’ve marginally cut our FY24/25 EBITDA estimates by 1-2% and maintained our REDUCE rating with a TP of INR120/sh (implying 70x Jun-25 EV/EBITDA).
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