NYKAA - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 20 Dec 25, 11:15 pm

Fundamental Rating: 2.9

📊 Financials Overview:

• Revenue & Profit Growth: PAT declined from 12.9 Cr. to 12.2 Cr. (↓ 24.2%), showing weak quarterly momentum.
• Margins: ROCE at 6.25% and ROE at 6.10% indicate low profitability.
• Debt Ratios: Debt-to-equity at 0.08 shows manageable leverage.
• Cash Flows: Dividend yield at 0.00% means no cash return to shareholders.

💹 Valuation Indicators:

• P/E Ratio: 1,109 vs Industry PE of 42.2 → extremely overvalued.
• P/B Ratio: Current Price / Book Value ≈ 41.6, highly expensive relative to fundamentals.
• PEG Ratio: -549 → negative, suggesting unsustainable valuation relative to growth.
• Intrinsic Value: Fair value estimated near 160–175 ₹; current price (249 ₹) trades at a steep premium.

🏭 Business Model & Competitive Advantage:

• Nykaa operates as an e-commerce platform specializing in beauty, fashion, and lifestyle products.
• Strong brand recognition and wide product portfolio provide competitive edge.
• However, profitability remains weak, and valuations are disconnected from earnings strength.

📈 Entry Zone & Long-Term Guidance:

• Entry Zone: Attractive accumulation range between 160–175 ₹.
• Long-Term Holding: High-risk investment; suitable only for investors betting on long-term e-commerce growth.

Positive

• Strong brand presence in beauty and lifestyle e-commerce.
• FII holdings increased by 0.91% and DII holdings by 1.35%, showing institutional confidence.
• Low debt-to-equity ratio (0.08) provides financial stability.

Limitation

• Extremely high P/E ratio (1,109) compared to industry average (42.2).
• Weak ROE (6.10%) and ROCE (6.25%) indicate poor capital efficiency.
• No dividend yield, limiting shareholder returns.
• Quarterly PAT declined by 24.2%, showing earnings weakness.

Company Negative News

• No major negative news reported; valuation premium and weak profitability remain key concerns.

Company Positive News

• Institutional holdings increased, reflecting investor confidence in long-term growth story.
• Strong consumer brand recognition in India’s e-commerce sector.

Industry

• Industry PE at 42.2, far lower than Nykaa’s 1,109.
• Sector growth driven by rising digital adoption and consumer demand for online retail.

Conclusion

⚖️ Nykaa demonstrates strong brand presence and institutional support but suffers from weak profitability and extreme overvaluation. Long-term investors should only consider entry near 160–175 ₹ for margin of safety, while current levels pose significant valuation risks despite growth potential in India’s e-commerce sector.