Nykaa Reports Strong Q4 Performance and Positive Growth Prospects

FSN E-Commerce Ventures Ltd, the parent company behind Nykaa, has recently shared its business update for the fourth quarter of the fiscal year. The company anticipates a consolidated net revenue increase in the range of low to mid-20 percent year-on-year. This forecast reflects a solid performance throughout the year, positioning Nykaa for a full-year revenue growth in the mid-20s.

Robust Growth in the Beauty Sector

Nykaa’s beauty segment is set to outperform the industry with a Gross Merchandise Value (GMV) growth projected in the low thirties. Key factors driving this impressive growth include:

• Focused Customer Acquisition: Strategic investments in acquiring new customers over the past quarters have led to consistent order volume increases.
• Retail Expansion: The company has seen strong retail performance, bolstered by same-store sales growth (SSSG) and the opening of 19 new stores in Q4FY25.
• Successful Brand Portfolio: The House of Nykaa is thriving, benefiting from both homegrown and acquired brands.

Nykaa commented, “The beauty vertical has sustained its strong momentum from previous quarters, achieving net revenue growth in the mid-twenties.”

Fashion Segment Insights

In contrast, Nykaa’s fashion vertical is expected to record GMV growth in the high teens. Although there’s a sequential improvement in the core platform business, the overall net revenue growth may be tempered due to underwhelming performance from Nykaa Fashion’s owned brands and a decrease in content-related activity during Q4FY25, which typically peaks in the third quarter.

Brokerage Analysis and Forecasts

According to Nuvama Institutional Equities, Nykaa is poised for a 29% GMV growth in the Beauty and Personal Care (BPC) segment for the fourth quarter, with the fashion segment expected to grow by 10%. Overall revenue is projected to rise by 25% year-on-year, reaching approximately ₹20.1 billion. They also predict a slight increase in EBITDA margin to 6.3% for Q4FY25.

HDFC Securities provided additional insights, stating, “Nykaa continues to excel as an efficient online business, particularly in the BPC sector. The fashion segment is a work in progress. After a two-year valuation correction, the current valuations appear attractive. Valuing the core BPC at 39x FY27 EV/EBITDA indicates that we are essentially paying only for the core BPC business, with fashion and eB2B as additional value propositions.”

Looking ahead, HDFC Securities forecasts that Nykaa’s core BPC online Average Units per Customer (AUTC) and orders are likely to grow at a 20% to 21% CAGR from FY25 to FY27. They noted that initial challenges with the new ad tech stack appear to be resolving, leading to an increase in advertising and shipping income, which is expected to normalize upwards.

Market Reactions

Despite these promising updates, Nykaa’s shares experienced a decline of 2.77% in early trading, bringing the price to ₹171.95. This market response indicates ongoing investor sentiment surrounding the growth trajectories in both the beauty and fashion sectors.

As Nykaa continues to develop its strategies and expand its offerings, industry watchers remain optimistic about its potential to achieve sustained growth and profitability in the competitive e-commerce landscape.