Latest News Nykaa, the beauty and personal care giant under FSN E-Commerce Ventures, delivered an impressive financial performance for the quarter ended June 2024, sending its shares soaring by 6% on Wednesday on the Bombay Stock Exchange (BSE). The stock hit a day's high of Rs 197.35, reflecting the market's positive reception to the company's robust earnings report.
Nykaa's net profit skyrocketed by a staggering 152% year-on-year (YoY). Nykaa reported a net profit of Rs 13.64 crore for Q1 FY2024, a leap from the Rs 5.
42 crore it posted in the corresponding quarter of the previous year. This growth was underpinned by a 23% increase in revenue from operations, which stood at Rs 1,746.11 crore, up from Rs 1,421.
82 crore in Q1 FY2023. In a move to strengthen its portfolio, Nykaa's board of directors approved the acquisition of an additional 39% stake in Dot & Key Wellness, a prominent player in the wellness segment. This acquisition aligns with the pre-agreed terms set out in the shareholder agreements of September 2021 and January 2024.
With this, Nykaa aims to further solidify its foothold in the wellness market, a segment with growth potential. Furthermore, Nykaa's board also greenlit further investment in Earth Rhythm, a brand known for its eco-friendly and sustainable beauty products. The investment, which involves both primary and secondary components, will result in Earth Rhythm becoming a subsidiary of Nykaa.
Nykaa's strong financial performance has garnered positive reactions from leading brokerages, who see the company's growth trajectory continuing. JM Financial maintained its 'Buy' rating on Nykaa, setting a target price of Rs 230 per share. The brokerage highlighted Nykaa's Gross Merchandise Value (GMV) growth of 25% YoY, driven by a 28% surge in the Beauty and Personal Care (BPC) segment.
JM Financial also noted the company's focus on new customer acquisition and increasing conversion rates across segments as key drivers of its growth. Kotak Institutional Equities also reacted favourably, retaining its 'ADD' rating on Nykaa with a target price of Rs 195 per share. The brokerage acknowledged Nykaa's revenue growth of 23% YoY, bolstered by a 25% increase in overall GMV.
The Beauty and Personal Care segment showed strong performance with a 28% YoY GMV growth, while the fashion segment posted a more modest 15% growth. Kotak also pointed out the improvement in Nykaa Fashion's contribution margin (CM) by 950 basis points YoY, a positive indicator for future profitability. Nykaa's performance across its business segments has been a key factor in its overall success.
The Beauty and Personal Care segment, which now includes omnichannel offerings such as Nykaa.com, physical stores, and owned brands, has been a major contributor to the company's growth. The 28% YoY GMV growth in this segment shows the effectiveness of Nykaa's omnichannel strategy, which has successfully captured a broad customer base across online and offline platforms.
The Fashion segment, despite facing a relatively tougher quarter, managed to achieve a 15% YoY GMV growth. This segment includes Nykaa Fashion, LBB (Little Black Book), and Nykaa Man Lifestyle. While the growth was slower compared to the BPC segment, the improvement in the segment's contribution margin suggests that Nykaa is on the right track to achieving long-term profitability in this category.
Looking ahead, Nykaa's management remains optimistic about the company's growth prospects, especially in the B2B and international markets. While the company expects some challenges, particularly in e-commerce B2B and international segments, it is confident that these segments will eventually turn profitable. Analysts at JM Financial project that losses in these segments will peak in FY2026, with EBITDA profitability likely to be achieved by FY2029.
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