Nykaa sinks on weak Q3 but Goldman Sachs, Morgan Stanley remain optimistic

Nykaa’s consolidated net profit for the December quarter was down 59.5 percent on-year to Rs 27.9 crore, however, consolidated revenue jumped 36 percent to Rs 1,098 crore

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The share price of FSN E-Commerce Ventures, the parent of Nykaa, sank nearly 4 percent in the morning trade on February 10 following weak earnings for the quarter ended December.

Nykaa’s consolidated net profit for the reported quarter tanked 59.5 percent on-year to Rs 27.9 crore, however, consolidated revenue jumped 36 percent on-year to Rs 1,098 crore.

The company’s margin performance was disappointing, as it shrank 6.3 percent from 13.2 percent a year ago as marketing expenses skyrocketed.

The e-commerce company’s other expenses, which includes marketing costs, surged 107 percent on-year to Rs 324 crore, with the fashion segment pumping in funds on branding.

Brokerages Goldman Sachs and Morgan Stanley India, however, remain optimistic on FSN E-Commerce Ventures despite the weak earnings.

Morgan Stanley reportedly said the December quarter earnings were ahead of its estimates for topline and margins.

The company is continuing its focus on driving growth and profitability, it said, retaining its “overweight” call on the stock with a price target of Rs 2,040.

Goldman Sachs said the long-term growth outlook for the company remains unchanged even though it raised concerns over the deceleration of growth in Nykaa’s fashion vertical.

It, however, appreciated the improvement in the margin profile despite the year-on-year contraction and retained the “buy” call with a price target of Rs 2,420.

Shares of the company were down 3.8 percent at Rs 1,780.1 on the National Stock Exchange.

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