NYKAA – Has skyrocketing stock loose fuel?



The Company’s Stock Performance: In the past 1 year, NYKAA’s returns declined by 51% where the stock price plummeted from ₹275.26 on Jan 31, 2022, to ₹134.35 on Jan 24, 2023. The stock had a 200-Day Moving Average of ₹212.88 and a 50-Day moving average of ₹161.64.

The stock had a 52 week High of ₹319.62 and a 52 week Low of ₹120.7. Over the past 3 months, NYKAA delivered negative returns of 23% where the stock price declined from ₹174.9 in Oct 27, 2022 to ₹134.35 in Jan 24, 2023

Bonus Issue: In Oct 2022, NYKAA announced a 5:1 bonus share issue with the record date being Nov 11, 2022. The stock plunged by almost 9% post listing of bonus shares.

What We See: We see this as a temporary shakedown for the company and the growth prospects seems to be good in the upcoming financial years. NYKAA’s aggressive expansion may have been a concern for the investors who had exited. We expect the benefits from the expansion plans in the Middle East to kick in soon as the market is considered to offer rapid growth. At this price we see the stock to be more appealing. We maintain our “BUY” rating and the target price of ₹204 for NYKAA for FY24.

The fall is mostly due to the negative market sentiments as a result of the huge exits but the business is very well positioned in a growth trajectory considering the new partnership with the Apparel Group to undertake an omnichannel multi-brand beauty business in the Middle East.

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Harvind Viswanath https://www.linkedin.com/in/harvind-viswanath/

Equity Research Analyst (Crispidea)

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