Nykaa Share Price: Share price of FSN E-Commerce Ventures, the parent company of fashion and cosmetics retailer Nykaa, fell 5.11 percent on Monday, hitting a new one-year low. The share fell to a 52-week low of Rs 120.75 today from its previous close of Rs 127.25. The scrip has consistently hit new lows, particularly thanks to bulk deals, marking the departure of major pre-IPO investors who lost their stake after the mandatory lock-in expired. On a year-over-year basis, Nykaa is down 57.42 percent.
The stock has been falling since the lock-in period for pre-IPO investors and the company issued a bonus issue to stabilize the share price.
The counter’s 14-day relative strength index (RSI) came in at 20.36. A level below 30 is defined as oversold, while a level above 70 is considered overbought. The company’s shares have a price-to-equity ratio (P/E) of 429.83.
The stock last traded lower than 5-day, 20-, 50-, 100- and 200-day moving averages. Nykaa has an average target price of Rs 145, Trendlyne data showed, suggesting a potential increase of 17.41 percent. The stock has a one-year beta of 0.98, indicating medium volatility.
But now some analysts have started raising their rating for the stock as prices have come down a lot and valuation is turning favourable.
“We have always appreciated Nykaa’s business model,” said Manoj Menon, an analyst at ICICI Securities. “Having said that, after listing on the Indian stock exchanges, we have been sidelined due to valuations we cannot comprehend.”
The analyst upgraded the stock to ‘add’ (from ‘hold’) with a revised DCF-based target price of Rs 145 (from Rs 175 earlier), adding valuation now became palatable. He sees some significant risks to his call. They include chasing growth at high levels that can dilute gross margin, and success in the fashion industry can be difficult given the increased competition in the category.
“We believe the cyclical slowdown in BPC and fashion companies is somewhat priced in. We believe Nykaa continues to present a combination of (1) the largest beauty and personal care (BPC) company in a growing market (India), (2) good profitability metrics and prudent capital allocation, and (3) omni-channel in the ‘true sentence’ (going from online to offline).”
That said, competition from both vertical and horizontal peers may intensify and while ICICI Securities expects BPC’s revenues to grow, it believes Nykaa’s journey could be different – it will need to become more mainstream to drive this growth . The growth trajectory in fashion will be closely monitored.
A few others have also seen opportunity in a crisis. “(The) stock has partially corrected due to the global tech sell-off of rising yields and more recently due to the lock-in expiration on November 10, 2022,” said Amit Sachdeva, an analyst at HSBC Securities, in a recent report.
“We believe valuations are now even more attractive and underestimate structural growth opportunities in beauty and personal care.”
Sachdeva pegs the stock at Rs 361.67 in the coming year and has a buy rating.
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