Jefferies projects Nykaa's CAGR at 20% between FY24 and FY27; sees 28% upside in stock in base case

livemint.com:

FSN E-Commerce Ventures (Nykaa) with a target price of ₹220, implying an almost 28 percent upside. Jefferies has projected that Nykaa could achieve a compound annual growth rate (CAGR) of approximately 20 percent between FY24 and FY27.In its bull case scenario, growth could reach 25 percent, while in the bear case, it may dip to 15 percent over the same period, said the brokerage.Furthermore, the brokerage sees Nykaa's target price at ₹250 (45 percent upside) in the bull case scenario and at ₹130 (24.5 percent downside) in the bear case scenario."Nykaa has been able to carve out a niche for itself through its focus on BPC, which differentiates it from horizontals (Flipkart and Amazon).

In recent years, there has been a surge in the number of customers transacting for the company. Nykaa should benefit from the increasing order frequencies and basket values, as the newer customer cohorts mature.

We expect Nykaa to remain in a hyper-growth phase in the medium term as online BPC and fashion penetration ramp up," said the brokerage explaining its positive view.According to Jefferies, in the base case scenario, Nykaa anticipates a gradual increase in order frequency as its customer base matures. The brokerage firm also projects that the gross merchandise value (GMV) for both the beauty and personal care (BPC) as well as fashion categories will experience a growth rate of approximately 25 percent CAGR.Meanwhile, in the bull case scenario, Jefferies projects robust growth for Nykaa's beauty and personal care (BPC) segment, estimating a strong compound annual growth rate of approximately 25 percent in orders from FY24 to FY27.