Business

IIE Digital Desk : Nykaa shares could rally up to 46% from their current levels as buy calls get louder from brokerages. The company's BPC (Beauty and Personal Care) segment is expected to grow at a healthy pace, while the fashion business is expected to sharpen its focus on private labels to reduce marketing costs.

Kotak Institutional Equities, Jefferies, and Nomura have all recommended a 'Buy' on Nykaa shares. Kotak Institutional Equities has a target price of ₹2,500 on the stock, while Jefferies and Nomura have target prices of ₹2,400 and ₹2,300, respectively.

The brokerages have cited the following reasons for their bullish outlook on Nykaa:

Healthy growth in the BPC segment: The BPC segment is expected to grow at a healthy pace of 25-30% in the next few years. This is driven by the increasing popularity of online shopping and the growing demand for beauty and personal care products in India.

Focus on private labels in the fashion business: Nykaa is focusing on private labels in the fashion business to reduce marketing costs. Private labels are more profitable than third-party brands as they do not require any marketing spend.

Strong financials: Nykaa has strong financials with a healthy balance sheet and good cash flow generation. This gives the company the financial flexibility to invest in growth initiatives.

The brokerages believe that Nykaa is well-positioned to continue its growth momentum in the coming years. The company has a strong brand, a loyal customer base, and a robust online platform. These factors should help Nykaa to continue to grow its market share in the Indian e-commerce market.

Nykaa shares are trading at a discount to their intrinsic value. The brokerages believe that the stock is undervalued and has the potential to rally up to 46% from its current levels. Investors who are looking for exposure to the Indian e-commerce market could consider buying Nykaa shares.