Nykaa shares faced heavy selling pressure on Tuesday, a day after the cosmetics-to-fashion retailer — whose stock debuted in the secondary market in November 2021 — reported its financial results for the quarter ended December 2022. The stock of FSN E-Commerce Ventures — the parent of Nykaa — slumped by as much as Rs 7.6 or 5.1 per cent to Rs 142.1 apiece on BSE, coming within Rs 22 of an all-time low hit last month.

Nykaa Q3 results

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After market hours on Monday, Nykaa reported a 70.7 per cent year-on-year fall in net profit to Rs 8.2 crore for the third quarter of the current financial year. Its revenue expanded 33.2 per cent to Rs 1,462.8 crore compared with the corresponding period a year ago, according to a regulatory filing. 

Nykaa management commentary

Nykaa Executive Chairperson, MD and CEO Falguni Nayar pointed out that the company's business delivered consistent strong gross merchandise value (GMV) and revenue growth. Gross merchandise value is a key measure of income that determines the total value of sales on a platform over a given period of time. 

"The performance has been especially good given the backdrop of eight fewer festive days in the quarter compared to Q3FY22 (October-December 2021)... Fashion now contributes to 25.9 per cent of GMV," she said. (Read more on Nykaa Q3 results) 

Here's what top brokerages recommend on Nykaa shares after the cosmetics-to-fashion retailer's Q3 results:

Brokerage Rating Target price
Goldman Sachs Neutral Reduced to Rs 200 from Rs 233
Jefferies Buy Rs 200
HSBC Buy Reduced to Rs 300 from Rs 361

Goldman Sachs highlighted that Nykaa fell short of the brokerage's estimates in the October-December period, with no clear sign of a near-term pickup in the beauty and personal care (BPC) segment. 

The brokerage lowered its revenue estimate for the company over the three years ending March 2025 by four per cent.

"New-age digital stocks are not doing great primarily because the market is not doing great. India is underperforming this year with a negative YTD return while the markets like China, Hong Kong and South Korea are doing very well. When India’s underperformance changes, new-age digital companies also will start to perform," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

"The long-term growth potential of these companies is huge and, therefore, in spite of the short-term challenges, these stocks have buyers particularly after the sharp correction from their listing peak prices," he said. 

The Nykaa stock has grown 7.3 per cent in value in the past one month, a period in which the Nifty50 benchmark has declined 0.7 per cent.

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