Devangshu Datta
12 Nov 2022
Further gains in margins & growth in fashion section some potential triggers
Excellent results from FSN E-com-merce (Nykaa) has led to a big surge in the share price. This bucks the trend where most unicorns have seen bearish movements after listing.
Nykaa reported revenue growth of 7.2 percent quarter-on-quarter (QoQ)(39 Percent year-on-year (YoY)) to Rs. 1,231 crore in the July - September quarter for the 2022-23 financial year (Q2FY23). Gross profit grew 9.4 percent QoQ (47.5 percent YoY) to Rs.558 crore. Earning before interest,tax,depreciation & amortisation (ebitda) grew 32.8 percent QoQ (and 112 percent YoY) to Rs.61 crore in Q2FY23.
Apart from revenue growth, decreased marketing & advertising expenses (down 5.8 percent QoQ) helped to boost ebitda. However, employee benefits expense (up 6.1 percent QoQ), fulfillment expense (up 11.9 percent QoQ) & other expenses (up 19.9 percent QoQ), all saw rises.
The ebitda margin rose 96 basis points (bps) & 171 bps QoQ & YoY respectively, to 5 percent . The net profit grew 3.6 percent QoQ & 342.9 percent YoY to Rs. 5.2 crore. The quality of revenues may have changed & improved with 'other income' down 22.6 percent QoQ & increased finance costs up 35.1 percent QoQ & up 79.4 percent YoY. The Q2 net profit margin stood at 0.4 percent.
The guidance suggests Nykaa's beauty & personal care (BPC) segment (contribution of 69.5 percent to gross merchandise value or GMV) may post 25 percent YoY revenue growth in 2022-23, while AOV (average order value) remains flat. The fashion vertical has made less headway.
The possible profitability drivers for BPC segment could include higher ad revenue,lower fulfillment costs, increased share of private labels & a more favourable product mix. The BPC ebitda margin could rise to 13-14 percent which would be a jump of 800 bps. The growth momentum could accelerate due to the festival & wedding season.
The QoQ GMV growth of 9 percent was driven by 8 percent increase in BPC & 37 percent growth in 'others' but only in fashion. The consolidated GMV reached Rs. 2350 crore with Rs. 1200 crore in net sales value & Rs. 1230 crore in revenue. The management claimed that the low growth in fashion was due to a decision to chase the right customer cohort & focus on profitability.
Capex investments in warehousing & store expansion resulted in higher depreciation expense. Channel expThe guidance suggests Nykaa's beauty & personal care (BPC) segment (contribution of 69.5 percent to gross merchandise value or GMV) may post 25 percent YoY revenue growth in 2022-23, while AOV (average order value) remains flat. The fashion vertical has made less headway.
The possible profitability drivers for BPC segment could include higher ad revenue,lower fulfillment costs, increased share of private labels & a more favourable product mix. The BPC ebitda margin could rise to 13-14 percent which would be a jump of 800 bps. The growth momentum could accelerate due to the festival & wedding season.
The QoQ GMV growth of 9 percent was driven by 8 percent increase in BPC & 37 percent growth in 'others' but only in fashion. The consolidated GMV reached Rs. 2350 crore with Rs. 1200 crore in net sales value & Rs. 1230 crore in revenue. The management claimed that the low growth in fashion was due to a decision to chase the right customer cohort & focus on profitability.
Capex investments in warehousing & store expansion resulted in higher depreciation expense. Channel expansion continued with 123 stores in 53 cities along with 31 fulfillment centres in 14 cities. The company has made an international foray with product listings on four portals in the Gulf countries & two in the USA. Competition is likely to increase with Amazon & Myntra, both pushing for allocating BPC on their platforms.
After trading weak through october, the stock jumped over 10 percent on the results to Rs. 208. It went ex-bonus this week with a 5:1 ratio (five new shares issued per existing share). Analysts have optimistic valuations with target estimates of Rs.221, Rs.238 & Rs.280 (all bonus-adjusted). A rising ebitda margin, & a potential acceleration of growth in the fashion section could be drivers.ansion continued with 123 stores in 53 cities along with 31 fulfillment centres in 14 cities. The company has made an international foray with product listings on four portals in the Gulf countries & two in the USA. Competition is likely to increase with Amazon & Myntra, both pushing for allocating BPC on their platforms.
After trading weak through october, the stock jumped over 10 percent on the results to Rs. 208. It went ex-bonus this week with a 5:1 ratio (five new shares issued per existing share). Analysts have optimistic valuations with target estimates of Rs.221, Rs.238 & Rs.280 (all bonus-adjusted). A rising ebitda margin, & a potential acceleration of growth in the fashion section could be drivers.