With no external capital requirement, the business remains least impacted by the interest rate hikes, it said while citing multiple surveys that suggest consumer sentiment in India is inching upwards.
“The festive season having kicked off in earnest, we continue to believe that Nykaa is well positioned to capitalise on the growth of the Indian BPC and fashion market on the back of its new initiatives, omnichannel strategy and the house of brands approach,” it said.
The domestic brokerage said the recent management commentary on strategic choice to maintain a profitable approach is clearly positive. It rolled forward its estimates to September 2023 with a target of Rs 1,780, suggesting a 31 per cent potential upside.
“The company continues to deliver topline growth across BPC and Fashion, despite the recent macro headwinds. Nykaa’s customer base and target categories seem to be relatively resilient with the company managing to inculcate the desired consumer behaviour that has drawn strong loyalty and repeat purchases,” JM Financial said.
Nykaa Fashion is only gaining market share slowly, it said, adding that Nykaa BPC will continue dominating the competitive landscape and display operating leverage.
The brokerage has factored in a slightly lower than expected growth/margins in Fashion while it feels that Superstore business will also require investments over the near to medium term.
“This should, however, result in improved margins over a higher revenue base over the long-term. We continue to see Nykaa remaining a differentiated player with our September 2023 target of Rs 1,780,” it said.
The target, at Friday’s intraday price of Rs 1,355, suggests a 31.36 per cent potential upside for the stock.
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