Nykaa share price jumps over 5% after strong Q2 results. Should you buy, sell or hold the stock?

Nykaa share price jumped over 5% in early trade on Wednesday, November 13, after the company reported strong results for the second quarter of the financial year 2024-25 (Q2FY25). Nykaa shares rallied as much as 5.74% to ₹187.85 apiece on the BSE.

FSN E-Commerce Ventures, the operator of fashion and beauty retailer Nykaa, reported a net profit growth of 72% year-on-year (YoY) to ₹10.04 crore for the quarter ended September 2024.

The company’s revenue from operations in Q2FY25 rose 24% to ₹1,874.74 crore from ₹1,507.02 crore in the year-ago period. The beauty segment revenues jumped 24% YoY to ₹1,703 crore, while fashion segment revenue was up 22% YoY to ₹166 crore.

The gross merchandise value (GMV) during the quarter ended September 2024 increased by 24% YoY to ₹3,652 crore. The GMV for the beauty segment rose 29% YoY to ₹2,783 crore and for the fashion business by 10% YoY to ₹863 crore.

Analysts' review

Brokerage firm Nuvama Institutional Equities expects an improvement in growth in H2 due to higher festive and wedding demand.

“We continue to forecast an improvement in profitability on the back of operative leverage, although we have moderated our expectations due to elevated marketing spends. We are reducing FY25, FY26 and FY27 PAT estimates by 8.2%, 8.0%, 8.7%,” Nuvama Equities said.

The brokerage firm maintained a ‘Buy’ rating on Nykaa shares but cut the target price to ₹205 per share from ₹220 earlier.

Kotak Institutional Equities trimmed its FY2025-27 EBITDA estimates by 6-9% as it assumes lower profitability in the BPC business on account of higher marketing spends and S&D expenses as well as slightly higher loss run-rate for the eB2B business.

“We also note a potential risk from quick commerce companies, which continue to add brands and SKUs and may eventually put pressure on Nykaa’s fulfilment costs. We also align depreciation charge to 1HFY25 run-rate resulting in a sharply higher EPS cut,” said the brokerage firm.

It retained a ‘Sell’ rating and reduced Nykaa's share price target to ₹170 apiece from ₹190 earlier.

At 9:40 am, Nykaa shares were trading 0.82% higher at ₹179.10 apiece on the BSE.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.