ICICI Securities Anticipates Much Higher Competition for Nykaa

Despite Falguni Nayar-led e-commerce giant Nykaa making Rs 1,300 crore in FY22, brokerage firm ICICI Securities claims it is not the right time for individual investors to buy more stock. On the other hand, it is not a stock to get rid of it either.

The brokerage firm raised its price target from Rs 1,250 crore to Rs 1,300 crore but maintained a "hold" rating. Nykaa's share price was above its target at Rs 1,370 at 10:13 am on Monday after a slight rise in early morning trading. Nykaa's earnings for the fourth quarter of FY22 were in line with analysts' expectations. However, competition in this segment can intensify over time.

Apart from traditional players like Amazon, Flipkart, and Meesho which sell everything from clothes and cosmetics to groceries to items in the home category. Nykaa also competes with businesses like Purplle that work in the same domain as the company. Purplle is currently valued at over $700 million.

The long-term outlook for the company is good. ICICI Securities emphasized that Nykaa is currently operating at Golden Point and that three aspects are advantageous. First, it continues to be the largest beauty and personal care company in India.

Nykaa reported that sales in 2010 increased by approximately Rs 1,300 crore to Rs 3,774 crore. However, net income decreased by Rs 20 crore over the same period. ICICI estimates that revenue could reach $1 billion over the next two years. Revenues can also increase proportionally over the same period, according to the report.