Motilal Oswal has started covering Nykaa, the popular online beauty retailer, and gave it a neutral rating with a target price of Rs 280 per share. That target suggests the stock could rise about 10% from its recent close.
Why Nykaa Stands Out
Nykaa commands roughly 27% of India's online beauty and personal care (BPC) market, making it the leading specialist platform in the space. The company relies on a strong brand, content‑driven discovery, and a curated product range, which sets it apart from discount‑focused e‑commerce sites.
Business Model Highlights
- Content & Influence: Guides shoppers through reviews, videos and influencer tips.
- Direct Brand Partnerships: Works closely with beauty brands, reducing reliance on third‑party sellers.
- Omni‑channel Presence: Combines online sales with physical stores, helping fight counterfeits.
- Own Brands: The "House of Nykaa" line adds higher‑margin products.
Growth Outlook for India's Beauty Market
Online penetration in the BPC segment is expected to climb from about 22% in FY25 to roughly 35% by FY30. As consumers shift toward premium skincare, fragrances and cosmetics, Nykaa’s focus on high‑end items positions it well to capture this demand.
Financial Projections
- Gross merchandise value (GMV) from the BPC segment is projected to grow at a 26% CAGR through FY30 and 22% CAGR to FY37.
- EBITDA is expected to rise at a 35% CAGR over FY25‑30, driven by operating leverage and better margins from owned brands.
Valuation Approach
Motilal Oswal used a sum‑of‑the‑parts method. It applied a 50× EV/EBITDA multiple to the BPC business, valuing that segment at Rs 255 per share. The fashion side was valued with a discounted cash‑flow model, adding about Rs 31 per share. Together, these give a target of Rs 280.
Why the Rating Is Neutral
Even though the long‑term fundamentals look solid, the brokerage believes much of the upside is already reflected in the current price. Hence, the neutral rating reflects a balanced risk‑reward profile.
Current Market Snapshot
At around 10:10 am, Nykaa shares were flat but slightly down, trading at Rs 252.20 on the BSE.
Disclaimer
Remember, this is just an analysis, not a prediction. Do your own research and consider your personal financial situation before making any investment decisions.