Nykaa shares fall even after strong Q4 update; Street divided on whether stock can rally

Brokerages remain constructive on FSN E-Commerce Ventures Ltd. (Nykaa) ahead of its March quarter results, with expectations of strong revenue growth, improving profitability and narrowing losses in the fashion segment.

Macquarie retained its “outperform” rating, noting that the company’s pre-Q4 update points to steady performance in beauty and slightly better-than-expected traction in fashion.

The brokerage firm has set a target price of ₹210, flagging a near 16% downside from the current trading price of about ₹248.5.

The brokerage expects consolidated Gross Merchandise Value (GMV) and revenue growth in the late twenties, with sequentially flat EBITDA margins in beauty and moderating losses in fashion.

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BofA Securities

BofA Securities also maintained an “underperform” rating with a target price of ₹220, citing GMV growth of 27–28% across beauty and fashion and overall revenue growth of around 29%.

It expects EBITDA margins to improve modestly to 8.5%, while fashion losses are likely to narrow sharply to about ₹20 million in Q4 from ₹80 million in the previous quarter.

The brokerage added that geopolitical tensions in the Middle East have had no material impact on the company's business, as the region contributes less than 1% to revenue.

Nomura

Nomura, which has a more bullish stance with a “buy” rating and a target price of ₹305, expects strong revenue momentum to sustain, led by continued strength in beauty and acceleration in fashion growth.

Being the only brokerage to flag a 22% upside on the current market price of the stock, it estimates beauty segment growth in the late twenties and fashion growth in the late thirties, with EBITDA margins at around 7.6%.

The brokerage also sees valuations as attractive, with the stock trading at 4.6 times the FY28 estimated enterprise value (EV)/sales.

Citi

Citi said Nykaa’s business update signals a second consecutive quarter of recovery in beauty growth and a continued bottoming out in fashion, with growth estimated at around 38% year-on-year.

The brokerage expects EBITDA margins to expand to 8.2% in Q4, supported by operating leverage, strong performance of owned brands, and advertising revenues.

Citi also noted that while marketing and distribution spends in the beauty segment have outpaced sales growth, this has been accompanied by strong customer acquisition, helping sustain margin expansion. In fashion, the segment is expected to move towards operational break-even.

Street sentiment on FSN E-Commerce Ventures remains positive, according to Bloomberg consensus data. 14 of 26 analysts tracking the stock have given it a ‘buy’ rating, six gave a ‘hold’ rating, and another six gave a ‘sell’ rating.

The average 12-month target price stands at ₹271.75, implying an upside of over 9% from the last traded price of ₹248.70. The stock has also delivered a strong 45% return over the past 12 months.