Equirus Securities said FSN E-Commerce Ventures Ltd., the owner of cosmetics and fashion products retailer Nykaa, is fashionably forward and “beautifully positioned” to capitalize on the growth opportunities.

The brokerage initiated coverage on FSN E-Commerce, which is listed on the National Stock Exchange under the NYKAA symbol, with Long rating and a target price of 240 rupees per share. The stock closed at 174.50 rupees yesterday.

Nykaa is India's largest online specialty beauty and personal care (BPC) retailer, Equirus said in an investor note, adding that Nykaa BPC commands a 38% market share, and boasts of robust prospects (FY24-FY29E 26% gross merchandise value CAGR), EBITDA margins of over 11% in FY24 and prudent capital allocation.

“Its content and inventory-driven model is a key differentiator – more so as the former cannot be replicated by new entrants just on the strength of capital,” it added.

The brokerage said India's changing beauty market is on a decade-long growth trajectory, as increased aspirational spending in non-metro cities and availability of global brands would broaden category spends for skin care and cosmetics.

“Insights from global beauty markets, India's beauty TAM (total addressable market) [$31 billion opportunity by CY27E), and Nykaa's strong positioning give us confidence on the company sustaining its growth trajectory over the next decade,” analysts Samarth Patel and Vraj Shah said in the investor note.

Equirus said Nykaa, which was founded in 2012 by Indian entrepreneur Falguni Nayar, is set to capitalize on category growth due to its:

Content-driven, non-discount-led approach
Omni-channel presence with 187 physical stores across Luxe, On Trend, and Kiosks formats
Inventory-based model ensuring product authenticity
Effective marketing practices benefiting both Nykaa and brand partners
A diverse portfolio of 13 own brands bridging market gaps and aiding margins

Nykaa's Superstore, a e-B2B distribution platform for beauty products, further solidifies its omni-channel BPC presence, the brokerage said.

Under the brand, Nysaa, in partnership with the Apparel Group, Nykaa aims to tap into high per capita BPC spends of $500 in the Gulf Cooperation Council (GCC) region, with plans to expand to 70 stores by FY28E, it added.

Equirus also said Nykaa Fashion -- with a curated range and 14 owned brands and focus on style over discounts -- is poised to deliver a 28% GMV CAGR during FY24-FY29E.

Nykaa Fashion is also set to achieve an EBITDA breakeven by FY26E, 4%-5% EBITDA margins (percentage of net sales value) by FY27E, and over 10% EBITDA margins (percentage of NSV) on steady-state basis, it noted.

“At our DCF-based Sep. 2025 TP of 240 rupees, the stock trades at FY28E P/E of 58x and an EV/EBITDA of 35x – attractive in our view, given solid steady-state FCF (free cash flow (FCF) generation,” Equirus said.

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