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Home / Markets / Stock Markets /  JM Financial initiates coverage on Nykaa shares with 'Buy' rating
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Brokerage house JM Financial has initiated coverage on Nykaa as going forward, it expects Nykaa to continue strengthening its market leadership in Beauty and Personal Care (BPC) while enhancing market share in the larger Fashion segment.

“Our proprietary analysis of Nykaa’s customer engagement metrics and advertising trends of BPC/Fashion brands suggests that Nykaa is likely to become the preferred RoI driven advertising platform for partner brands that will enable robust margin expansion. Furthermore, we foresee the aggressive omnichannel expansion to drive significant brand recall and organic customer acquisition for the company," the note stated.

Nykaa is a unique player with profitability while logging a robust 48.2% FY19-21 CAGR. It has a diverse portfolio of beauty, personnel care and fashion products, including its owned manufactured brand products. The beauty start-up had made its stock market debut in early November. Many brokerages had recommended to subscribe to Nykaa's public issue for long-term.

"We advocate that Nykaa should continue to aggressively expand its retail store network as it helps the company in organic customer acquisition, providing touch and feel experience to online buyers, and also tap on consumers’ wallet share that was being spent in-person during travel/outings," the brokerage added.

Though, JM Financial said that the key downside risks to its target price include failure of Fashion business to ramp-up, margin dilution due to expansion coming at the cost of premiumisation and lower spends per customer, and a sharp rise in competitive intensity. The brokerage's Buy rating comes with a target price of 2,480 per share.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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