Nykaa posts strong Q2FY27 growth as stock gains 5% after update

The beauty and personal care (BPC) segment, Nykaa's largest, is expected to have recorded NSV and revenue growth in the high 20s despite a larger base, supported by early festive spending, new customer acquisitions, repeat orders, and strong traction from House of Nykaa brands. Store expansion continued, with 14 new stores added in the quarter, taking the total footprint to 338 as of 30 September. Like-for-like store growth in BPC reached its highest level in six quarters.

The fashion segment emerged as a significant growth driver, with Q2 NSV growth expected in the high 40s and revenue growth in the early 40s—materially ahead of JM Financial's 35% estimate. This follows 53% NSV growth in Q1FY27. Growth in fashion was fueled by new customer additions, over 250 brands added during the quarter, and continued success of the Nike partnership, including exclusive product drops. The segment reported near break-even EBITDA in Q1 and could move into profitability in Q2.

Both segments contributed to improved margins through operating leverage. In Q1FY27, BPC's NSV reached ₹2,371 crore, up 29% year-on-year, with EBITDA margin expanding from 9% to 10.3%. Fashion NSV jumped 53% to ₹451 crore. Consolidated EBITDA rose 66% year-on-year to ₹236 crore, with margin increasing from 6.5% to 8.5%. JM Financial expects Q2FY27 EBITDA to reach ₹256 crore, a 61% year-on-year increase, with margin holding at 8.5%, and net profit to nearly triple to ₹101 crore from ₹80 crore in Q1.

Despite the positive trajectory, risks persist, particularly intense competition in fashion marked by aggressive discounting and expansion by rivals. Nykaa's relatively lower capitalization compared to peers with deeper pockets or larger customer bases could pressure earnings. Additionally, the rapid scaling of SuperStore, its B2B distribution business—which posted 17% year-on-year GMV growth to ₹340 crore in Q1—poses a margin dilution risk due to its lower-margin profile if growth comes at the expense of core operations.

Analysts from Nomura Financial Advisory and Securities (India) noted that consistent improvement in EBITDA margin—projected at 8.7%, 10%, and 11% for FY26, FY27, and FY28 respectively—would be a key catalyst for the stock. While the festive season and sustained customer acquisition could support momentum, much of the optimism appears already reflected in the current share price.