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FSN E-Commerce Ventures Ltd

| Q2 FY26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤7th Nov 25

Summary : Nykaa reported strong Q2 FY26 results with highest GMV and EBITDA growth since IPO, driven by robust beauty performance, fashion revival, and strategic investments in customer acquisition and brand expansion.

Management Perspective positive : Just happy to say that the GMV for the quarter was at INR 4,744 crores, which is about 30% year-on-year growth. Also, please note that this is the highest year-on-year growth in the last 6 quarters. So happy to report a little bit of a growth momentum. On the EBITDA front, the EBITDA has come out at INR 159 crores, which is 6.8% of net revenue, a 53% year-on-year increase and highest EBITDA margin since IPO. And also on the PAT, it's come out at INR 33 crores, which is about 1.4% of NR and 154% year-on-year growth.

Concall Report Analysis & Insights

Business Overview

  1. Q2 FY26 GMV grew 30% year-on-year to INR 4,744 crores, highest in 6 quarters.
  2. Net revenue increased 25% year-on-year to INR 2,346 crores, maintaining mid-20s growth.
  3. Gross profit reached INR 1,054 crores (44.9% of net revenue), a 28% year-on-year increase.
  4. EBITDA was INR 159 crores (6.8% of net revenue), up 53% year-on-year, highest since IPO.
  5. PAT grew 154% year-on-year to INR 33 crores (1.4% of net revenue), highest since IPO.

Future Growth Prospects

  1. Focus on Gen Z through campus programs, immersive events, and a dedicated app store.
  2. Expanding physical retail with 265 stores in 90 cities, adding 19 stores this quarter.
  3. Launching Nykaa Now for hyperlocal delivery of beauty and luxury products within 30-120 minutes.
  4. Introducing cutting-edge beauty technology like a skin analyzer tool for personalized recommendations.
  5. International expansion for owned brands like Kay Beauty, starting with the UK market.

Management Insights

  1. Nykaa delivered its highest year-on-year growth in GMV in the last 6 quarters.
  2. Beauty growth remains robust, and the fashion vertical has seen a significant revival.
  3. The company is accelerating customer acquisition and expanding its beauty store network.
  4. Nykaa is transitioning from a retailer to a House of Brands business, growing at 54% year-on-year.
  5. Fashion business is on track to fix fundamentals and is very optimistic for the future.

Signs of Skepticism

  1. Management noted a short-term transitory business loss in Superstore due to GST changes, but expressed confidence in future positive impact without detailed quantification.
  2. While fashion EBITDA improved, it remains negative at minus 3.5%, with management stating it's on the path to profitability.
  3. Increased marketing and S&D expenses were noted, with management expecting healthy returns, but immediate impact on profitability was not fully detailed.

Risk Factors

  1. Short-term transitory business loss in Superstore due to GST changes.
  2. Increased fulfillment expenses due to focus on faster delivery in fashion vertical.
  3. Stepped-up investments in performance marketing and brand building.
  4. Fashion business is younger and in early stages of tech platform sophistication.

Good To Know

  1. One Nykaa's cumulative customer base reached 49 million, a 32% year-on-year growth.
  2. The company offers 4,200 beauty brands and 5,000 fashion brands.
  3. Nykaa Now has 53 stores across seven cities, servicing 2 million orders with 30-120 minute delivery.
  4. Global icon Deepika Padukone was welcomed as Nykaa's brand ambassador.
  5. H&M Beauty and fashion portfolios will debut on Nykaa Fashion online.

Key Drivers

  1. Beauty segment shows robust growth.
  2. Fashion business is strongly reviving.
  3. New international brand partnerships.
  4. Gen Z customer acquisition focus.

Key Analyst Discussions

Competitive Environment

  1. Nykaa Now aims to gain market share in fragmented personal care segment.
  2. Nykaa is positioned as a premium platform for high fashion products.
  3. The company has the largest specialized beauty store network in India.

Market Trends & Consumer Behavior

  1. Gen Z is a key growth frontier for beauty, adopting fragrance globally and in India.
  2. Indian audiences show real appetite for global brands like H&M.
  3. Consumers are increasingly looking at Nykaa as a personal care destination.
  4. The broader market shows more positive signs compared to last year.

Financial Highlights

  1. GST changes had less than 1% impact on overall GMV, mainly affecting personal care and eB2B.
  2. Operating leverage is visible in both beauty and fashion, with EBITDA margins improving.
  3. Beauty vertical's operating leverage is influenced by the faster growth of younger businesses like eB2B.
  4. Investments in brand building and rapid stores are being made, impacting marketing and fulfillment costs.

Product Composition

  1. Fragrance is a fastest-growing category, a high ASP item, and a pillar in retail stores.
  2. Nykaa plans to open fragrance-only stores called Nykaa Perfumery in key metros.
  3. Fragrance sales are additive, not cannibalizing existing makeup and skincare sales.
  4. Owned beauty brands contribute over 75% to the House of Brands GMV.
  5. Nykd, the lingerie brand, is a key focus within fashion, growing 30% year-on-year.

Strategic Considerations

  1. Nykaa Fashion's recovery is driven by improving business intrinsics and a positive market environment.
  2. Nykaa Now's strategy includes quick delivery of luxury products via retail stores as hubs.
  3. International expansion for owned brands will be measured, focusing on specific geographies and retail partners.
  4. H&M partnership is online-only for fashion and beauty, with pricing and assortment parity.
  5. The company is investing in ad tech and personalization to create more advertising opportunities for brands.
FSN E-Commerce Ventures Ltd (NYKAA) Concall Report Analysis & Insights | Dhanarthi