Nykaa: To maintain steady growth in coming years

Nykaa’s revenue for Q4FY23 reached Rs 13 billion, showing a y-o-y growth of 34%. This figure aligns with market estimates, with Nomura predicting Rs 13.1 billion and the consensus estimating Rs 13.5 billion. The Ebitda margin for the quarter stood at 5.4%, which matched expectations.

Nomura had forecasted 5.5%, while the consensus projected 5.2%. Consequently, the Ebitda reached Rs 707 million, reflecting a significant y-o-y increase of 84%. The raw material (RM) costs as a percentage of sales were recorded at 55.8%, showing a decline of 80 bps compared to the previous quarter. However, this figure surpassed the anticipated level of 54.5% predicted by Nomura. On the other hand, other costs as a percentage of sales were lower than expected, standing at 29% compared to Nomura’s estimate of 30%. Employee costs, at 9.8%, were in line with projections. Overall, Nykaa’s Q4FY23 revenue and margins were broadly in line with market estimates. The company exhibited strong y-o-y growth in both revenue and Ebitda, while managing costs within expectations or even better in certain areas.

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In Q4FY23, Nykaa’s net sales value (NSV) experienced a y-o-y growth of 34%. The Beauty, Personal Care, and Wellness (BPC) segment saw a 29% increase, while the Fashion segment witnessed a 23% rise compared to the same period last year. The ‘Others’ category, which includes other product categories, demonstrated substantial growth with a staggering 257% increase. The average order value (AOV) in the BPC segment declined by 8% q-o-q, whereas the Fashion segment experienced an 8% increase during the same period. Nykaa expanded its presence by opening 10 BPC stores in Q4, contributing to its revenue growth.

The contribution margins for the BPC segment improved q-o-q, reaching 28%. Similarly, the Fashion segment’s contribution margins also increased to 2.6% compared to the previous quarter. These improvements indicate better profitability and operational efficiency in both segments during the quarter.

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Nomura continues to estimate a strong 25% CAGR for the BPC segment over FY23-30F. However, we lower Fashion CAGR to 13% over the same period, with a terminal year mix of 5% to NSV (vs 13% earlier). We factor in overall revenue CAGR of 25% over FY23-30F and Ebitda margin to expand to 12.7% by FY30F . With major expenses on employee costs and warehousing behind, we believe steady margin expansion should continue over the next few years.