HDFC Securities' research report on Fsn E-commerce Ventures
We recently interacted with Team Nykaa. Key takeaways from the interaction: (1) Nykaa’s run rate of 4-5mn customer additions annually in BPC (on a cumulative base of 18mn) remains on track; (2) ad income dip (as % of revenue) is attributed to teething issues with the new ad tech stack; recovery could be a quarter away; (3) Fashion’s soft Q1 performance (12% YoY) was an aberration and growth has been trending upwards; (4) Fashion business is over its peak investment phase. However, we suspect BPC cash generation is just about enough to fund growth in Fashion and B2B businesses in FY24. This could imply that measured growth in loss making units. (note: Nykaa Fashion’s debt has already tripled in FY23 to INR 4.2bn). We remain 12/19% below consensus on FY25/26 EBITDA basis (variance even higher on PBT basis).
Outlook
Our REDUCE rating stands with a DCF-based TP of INR130 (implying 162x Sep-25 P/E). Estimates remain unchanged.
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