On Monday, the share price of Nykaa decreased by 2%. With a target price of Rs 115 per share, brokerage company Macquarie has begun coverage on the stock with a “underperform” rating, meaning a decline of 23% from current levels. The lowest target price among brokerages that cover Nykaa offers is Macquarie.
With the lowest target price (TP) among brokerages of Rs 115 per share, foreign brokerage company Macquarie began coverage on the BPC (Beauty and Personal Care) platform, Nykaa. The TP indicates a decline of more than 23% from Nykaa’s March 3, 2023, with a closing price of Rs. 150.
The brokerage claimed that because growth is now shifting to smaller cities and the offline segment, the firm faces a risk to the margin in its beauty section. Reliance Retail (Tira) and Tata Cliq’s entrance into the market, at a time when competition in the category is already fierce, might compound Nykaa’s issues, it was stated.
We think Nykaa will need to reinvest leverage advantages to continue growing because major D2C firms are increasingly trying to go offline and customers want more physical locations to experience items in person, the company added.
With Nykaa entering the market to supply tiny mom-and-pop shops and so competing with a well-oiled distribution network that comes with a very low margin, Macquarie also sees a challenging route to profitability.
The brokerage expressed worry about Nykaa’s capacity to operate financially in the fashion category, as the firm provides a curated marketplace of independent / recently created own garment companies. According to an examination of offline merchants, players working with third-party brands have had very little success.
We are cautious about EPS (Earnings per Share) due to our limited operational experience and the necessity for expansion investments, the statement read.
According to the reports, Nykaa presently has 16 Buy, 2 Hold, and 2 Sell recommendations, with a consensus 12-month target price of Rs 201 per share. The share price of Nykaa has increased by 7% over the past month but has decreased by 34% over the past six months. The stock was down 2% at Rs 147.30 a share at 9.56 a.m. on the NSE.
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