Nykaa share price today: Shares in Nykaa fell nearly three percent on Monday after Macquarie initiated coverage of the cosmetics-to-fashion retailer with an “underperform” rating, citing risks to the company’s beauty segment margins. The brokerage has set a target price of Rs 115, marking a 22% downside from the current market price of Rs 147.8 per share.
Macquarie’s price target for Nykaa is the lowest among brokerages covering the stock. The brokerage firm’s bearish target for Nykaa is Rs 70, half the current levels.
FSN E-Commerce Ventures Ltd has an average target of ₹145.00, according to Trendlyne. The consensus estimate implies a downside of 1.56% (negative) from the last close of ₹ 147.30, it said.
According to the brokerage firm, the beauty shop poses a threat to the beauty unit’s margins as growth shifts to smaller cities, often off-chain, and competition threatens.
In the nascent fashion segment, experience in physical retail makes the brokerage more wary of the company-owned brand focus and curation-based positioning, Macquarie added.
“Investment in Nykaa beauty should be increased. The slim margins of a mom-and-pop store’s service capabilities. It has a limited operating history and the need for growth investments makes us cautious,” Macquarie said.
“As major D2C brands look to move offline and consumers demand more physical stores to experience products, we believe Nykaa will need to reinvest leveraged earnings to support growth,” the note said.
The brokerage said the entry of new players like Reliance Retail (Tira) and Tata Cliq could compound problems for Nykaa at a time when competition in the segment is tough.
“We remain concerned about Nykaa’s ability to grow successfully in the fashion segment, where the company serves a select market of third-party / newly developed private apparel brands,” the brokerage said in a note.
According to the research note, “Analysis of offline retailers shows that players using a curation-based approach with third-party brands have achieved limited success.”
The brokerage also sees a tough road to profitability with Nykaa’s foray into the business of catering to small mom shops, hence competing with a well-oiled distribution network that comes with very thin margins.
“Investment in Nykaa beauty should be increased. The slim margins of a mom-and-pop store’s service capabilities. It has a limited operating history and the need for growth investments makes us cautious,” he said.
Shares of Nykaa have lost more than 34 percent of their value in the past one year, during which the Sensex has gained 14 percent.
Headquartered in Mumbai, Nykaa is a beauty and fashion e-commerce company founded in 2012 by Falguni Nayar. The company offers a well-curated comprehensive selection of makeup, skin care, hair care, bath and body, fragrance, grooming products, personal care and health. and wellness categories.
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