Broker’s call: Nykaa (Buy)

Nykaa's 4.0 event solidified the company's position at the heart of India's evolving beauty ecosystem, drawing over 30,000 attendees. The occasion highlighted the firm's expanding moat, which encompassed brand breadth, creator reach, proprietary labels, and omnichannel discovery. Nykaa showcased a diverse array of 60 global and Indian beauty and wellness brands, spanning from Rare Beauty, Huda Beauty, to e.l.f.

An interesting trend was noted in the Nykaa Man booth, where the study suggested that younger men demonstrated significantly higher product awareness and were increasingly managing multi-product grooming routines. The company met three creators, each linked to Nykaa for more than a decade. Their narratives underscored both the resilience and professionalization of India's creator economy.

The advertising landscape appears to be transforming, moving towards creator-led discovery. In this new paradigm, peer recommendations and authenticity hold greater significance than traditional formats. Nykaa has established a distinct presence through its emphasis on Brand-to-Consumer Commerce (BPC), setting it apart from broader e-commerce platforms such as Amazon.

In recent times, Nykaa has witnessed a rise in transacting customers, and the company is poised to reap the benefits as newer customer cohorts mature, leading to increased order frequencies and higher basket values. The analysts anticipate that Nykaa will continue to experience hyper-growth in the medium term as online beauty and personal care (BPC) and fashion sectors expand.

The base case scenario values Nykaa's BPC segment at 50 times Sep-28 Adj EBITDA and its fashion segment at 2 times Sep-28 Net Sales Value (NSV). Consequently, the price target (PT) for Nykaa in the base case is calculated at ₹400.