Global brokerage firm CLSA has raised its target price for FSN E-Commerce Ventures Ltd, the parent company of Nykaa, to Rs 409 from Rs 376. The firm reiterated its 'Outperform' rating on the stock following Nykaa's robust second-quarter results for FY27, which saw shares climb approximately 3% to Rs 364.70.
CLSA's revised valuation reflects Nykaa's strong September-quarter performance, characterized by significant profitability improvements driven by operating leverage and enhanced margins. The new target price suggests a potential upside of around 16% from the brokerage's reported market price of Rs 352.60.
Strong Q2 FY27 Performance Fuels Optimism
Nykaa reported a 28% year-on-year (YoY) growth in revenue during Q2 FY27. Its Ebitda margin expanded by an impressive 196 basis points, reaching 8.7%. Ebitda figures surpassed CLSA's estimates by 5% and consensus expectations by 2%, while profit after tax (PAT) also exceeded estimates.
The brokerage attributed the margin improvement to effective operating leverage, solid business performance, and reduced customer acquisition costs. Nykaa's fashion segment experienced robust customer growth, bolstered by strengthened brand partnerships and an expanded luxury catalogue on its platform.
Growth Across Beauty and Fashion Segments
The beauty business recorded a 28% YoY growth in net sales value (NSV), supported by a 26.3% increase in average order value (AOV). NSV for Nykaa's own brands surged by 39% YoY. The beauty Ebitda margin improved by 150 basis points to 10.5%, primarily due to operating leverage, despite the festive season shifting entirely to the third quarter of FY27, which impacted purchase frequency in the September quarter.
Nykaa's fashion business also demonstrated strong growth, with gross merchandise value (GMV) increasing by 42% and NSV rising by 47%. This was driven by a 37% growth in AOV, leading to a 38% increase in orders. Nykaa Fashion expanded its offerings by adding over 250 brands during the quarter and continued to broaden its luxury catalogue, including new international brand partnerships.
CLSA Adjusts Future Estimates
In response to the strong performance, CLSA raised its FY27-FY29 estimates for Nykaa by 1% to 5%, accounting for improved margins and factoring in higher tax rates. The brokerage reaffirmed its 'Outperform' rating, citing the company's improving profitability, sustained operating leverage, and consistent growth across both its beauty and fashion sectors.