Nykaa’s beauty and fashion momentum supports Q2 FY27 margin expansion

Investment View and Valuation

In its October 4, 2026 pre-quarter update on FSN E-Commerce Ventures, JM Financial Institutional Securities Limited expects continued strong Q2 FY27 operating momentum across Nykaa's Beauty and Personal Care (BPC) and Fashion businesses.

The broker retained its BUY recommendation and maintained its earnings estimates, while raising the target price to Rs 405 from Rs 395 by rolling forward its valuation to September 2027 estimates. The revised target implied 24.6 per cent upside from the report's current market price of Rs 325. The report does not specify a separate valuation methodology beyond this roll-forward.

Q2 FY27 Consolidated Estimates

JM Financial expects strong year-on-year growth across key operating and financial metrics, supported by sustained top-line growth and favourable operating leverage as both verticals scale.

Beauty and Personal Care Outlook

For BPC, Nykaa is expected to deliver late-20s year-on-year growth in both NSV and net revenue in Q2 FY27, ahead of JM Financial's earlier expectation of about 25 per cent growth.

The broker notes that this performance comes despite a relatively difficult comparison base, as festive spending started earlier in Q2 FY26, whereas it has shifted to Q3 in FY27. The shift is also viewed as supportive of Q3 FY27.

Expected BPC momentum is supported by robust customer acquisition and repeat purchases, continuing outperformance from core and emerging House of Nykaa brands, and early-20s like-for-like store sales growth, the strongest in six quarters. The retail network expanded by 14 net stores during Q1 FY27 to 338 stores from 324.

Nykaa Fashion Outlook

Nykaa Fashion is expected to report late-40s year-on-year NSV growth in Q2 FY27, materially ahead of JM Financial's previous expectation of roughly 35 per cent. The broker forecasts Fashion revenue growth in the early 40s per cent, compared with its earlier estimate of about 31 per cent.

Key growth drivers identified by JM Financial include:

• New-customer additions.
• The addition of more than 250 brands across categories.
• Continued momentum in the Nike partnership, including exclusive product drops.

JM Financial estimates Fashion EBITDA of Rs 20 million, compared with a loss of Rs 120 million in Q2 FY26, implying a 0.7 per cent EBITDA margin.

FY27E Financial Outlook and Investment Case

For FY27E, JM Financial forecasts FSN E-Commerce Ventures net sales of Rs 129,148 million, up 28.9 per cent, EBITDA of Rs 12,209 million and an EBITDA margin of 9.5 per cent. It estimates adjusted net profit of Rs 5,428 million and diluted EPS of Rs 1.9.

The central investment case is that strong execution in Beauty and Fashion, customer acquisition, brand assortment expansion and operating leverage can sustain revenue growth and earnings-margin expansion. The report does not set out specific downside risks.