Nykaa, a prominent player in the beauty and fashion ecommerce sector, experienced a notable surge, with its shares rising by as much as 11% to reach INR 170.10 in Friday’s intraday trading on the BSE, marking an 11-month peak. Despite some retracement later in the day, the stock closed with a 9.5% gain at INR 167.75.
Unlike many new-age tech stocks that have seen substantial gains this year, driven by optimistic paths to profitability, Nykaa tells a different story. The stock faced subdued gains in the current year due to sluggish growth in its beauty and personal care (BPC) vertical and a decline in the fashion segment.
After the significant increase on Friday, Nykaa’s shares have entered positive territory for the year and have recorded an 8.4% year-to-date (YTD) gain.
Nykaa’s shares have been experiencing a robust upward trend since the previous week, triggered by the release of its Q2 FY23 earnings on November 6. Despite the modest growth in the company’s Beauty and Personal Care (BPC) business, the market has turned optimistic due to a resurgence in Nykaa Fashion.
In a year-on-year (YoY) comparison, Nykaa saw a 50% increase in net profit to INR 7.8 Cr in Q2, and sequentially, it rose by 44.4%.
Read More: Nykaa’s Q2 net profit soars to INR 7.8 Cr, marking 50% growth year-on-year
In the quarter, the company’s overall gross merchandise value (GMV) rose by 25% year-on-year (YoY) to reach INR 2,943.5 Cr, with the fashion vertical outpacing the growth in the Beauty and Personal Care (BPC) segment.
Since the release of its results for the September quarter, the shares have surged by more than 19% in the past two weeks.
Following the publication of Nykaa’s results, there was a division of opinion on the Street, primarily due to the increasing competition in the Beauty and Personal Care (BPC) sector.
Certain analysts perceive the entry of Reliance and Tata into the market as a potential challenge to Nykaa’s growth trajectory. In contrast, JM Financial asserts that Nykaa is likely to maintain its competitive advantage as the favored platform for brand launches.
Despite broader market pressure on Friday, Nykaa’s shares experienced a rally. The increase in risk weights for unsecured loans by the RBI negatively impacted banking stocks and temporarily disrupted the broader indices’ resurgence, according to Vinod Nair, Head of Research at Geojit Financial Services.